Saturn devouring his children – Goya
“In a statement released on Friday, Robertson says the proposed policy, which he intends to put in place by the end of the year, will give priority to local residents for sales of new homes in multi-family developments as part of the city’s new 10-year housing strategy. The city defines local residents as people who live and work in Metro Vancouver and whose permanent address and place of work is in the region, regardless of citizenship.
“My priority as mayor is to deliver new housing supply that is first and foremost for people who live and work in Vancouver, and this motion aims to give local residents the first opportunity to purchase a new home,” said Robertson. “In Vancouver’s red-hot housing market, local employers are crunched to retain talent, whether they’re doctors, tech workers, retailers, firefighters, teachers or nurses. I regularly hear stories about people who work in Vancouver, but are forced to move elsewhere in the region because they can’t find a place to live. At a time when we are seeing record levels of housing construction, local residents should be able to get the first shot at purchasing a home in new developments.”
“Vancouver’s Housing Vancouver strategy seeks to dramatically increase the supply of new housing, but it needs to be the right supply — homes that are affordable for people who live and work in Vancouver,” said Robertson. “We want young people and families to put down roots in the city. This motion will support that by helping make sure people who live and work here get the first opportunity to buy into new developments in Vancouver.”
– from ‘Vancouver’s mayor makes move to give locals first crack at condo pre-sales’, Scott Brown, Vancouver Sun 6 Oct 2017
Allowing our young to be first in line to buy preposterously overpriced RE, using large mortgages, will make them miserable, indentured wage slaves for life.
This will not solve Vancouver’s housing challenges, but will further impoverish our social environment.
The only ‘solution’ will be a bursting of the bubble, with a very large price crash, and a flushing out of all speculation in the market.
Such a price correction will return all properties to utility value, which is healthy.
Understandably, such a crash will never be facilitated by any incumbent government, at any level, and of any stripe.
Until then, expect many levels of government to continue to play ‘re-arrange the deckchairs on the Titanic’ with ineffectual policy tweaks (such as the one the mayor describes above).
“such a crash will never be facilitated by any incumbent government, at any level, and of any stripe.
Until then, expect many levels of government to continue to play ‘re-arrange the deckchairs on the Titanic’ with ineffectual policy tweaks.”
I wish they were ineffectual policy, but forever free money (now back to a whopping 1%, oh watch out cried chicken little BoC), and Canada’s wide open door to multi-millionaire migrants becoming PRs, or holding 10 year visas, all seems quite effectual so far, coming up on 20 years.
I do not expect ‘selling to locals’ will be awfully successful. Look up what happened in West Van – only half of units were actually purchased by locals, despite marketing them a as ‘affordable because cheaper than SFH’…
If the condos are built as ‘luxury’ condos, they will not be affordable to local families. Priority to buy will not change that.
This is how dumb politicians are:
– To qualify, you have to be a resident. In other words, your “need” to live in Vancouver has already been met—you just don’t own a new condo.
– Presumably the aim of the program is to support first-time buyers, but the criterion for eligibility is only that you currently live and work in the region. So, if you ALREADY own, and are simply keen on buying a new condo, you will benefit from the program to the exclusion of at least some of those it purports to help.
– Who will police whether people actually move in and live in these places? Once purchased, what’s stopping them from flipping them or renting them out to a non-resident? Is the city going to force people to live there for a certain period of time? It’s absurd.
– By excluding non-resident buyers from pre-sale condos, at least some of their demand will shift to existing condos and other property types—elevating prices for… first-time buyers. The program amounts to a mere subsidy from one set of first-time buyers to another.
I suppose the fact that they’re being bought by locals would at least ensure that they are added to the rental stock. Whereas a multi-millionaire foreigner is probably just looking for a place to park capital, or a place for his kids to live when sent to school here, or maybe a place to use as a launch pad from which to game our immigration system. Isn’t Trudeau reviving the Immigrant Real Estate Speculator Pro- I mean… the Immigrant Investor Program? The city may as well move to prevent that at least. As I said below, this will do NOTHING to prevent the bubble from continuing to inflate – locals buying rental stock will still fuel the bubble – but at least it will be rental stock.
The US bubble was driven to exhaustion not by NINJA loans, but by mass participation of regular middle class “investors”. The one metric that indicates a bubble more than any other is this: The proportion of homeowners who own more than one home.
No clue about Van, but in Torontoland it’s currently 1 in 6, which puts the GTA in ahead of some of the frothiest bubble markets in the US circa 2007. Mayor Robertson has just done his part to amp that ratio in Vancouver even further into the danger zone.
If you want to see what passes for real estate investment advice nowadays, read this article in the Ottawa Citizen. (I hope my href tag worked, i usually manage to mess them up)
For extra points, see if you can spot:
A) The erroneous tax advice
B) The suicidal financial advice (I’ll give you a hint, it has to do with “demand loans”, as well as the statement “…use as little capital as possible…”.
As an aside, what a lovely fresh-faced young couple to serve as poster children for the mass slaughter of an entire generation’s finances. For further entertainment, Google the company and the “finance expert” quoted liberally in the article. Ah hell, I’ll just give you a link:
That’s right. She started in 1996, giving loans to people who needed cosmetic surgery but were refused financing by the banks (heartless bastards). Now she’s helping people build their real estate empires one (apparently tax-free) rental unit at a time.
Agree re importance of ‘regular middle class “investors” ‘ in a RE bubble.
In the Vancouver case, one could argue that group includes the many locals who have been happy to leverage up to chase ever increasing prices to buy their homes. We’ve long maintained that these speculators (even though they may be using the property, they only pay preposterous prices (far above utility value) because they are ‘certain’ of further price gains) are the biggest ‘engine’ of the bubble. They’ve been responsible for the vast majority of transactions, and without them there would be no bubble.
Where are those Russian oligarchs when you need ’em?
Weird that London house prices are crashing now too.
I wonder if maybe London is not World Class the way that Vancouver is.
Or do they not have money laundering like we do?
Wait. I’ve got it. It’s Wizards.
Because as we know, the only plausible non-bubble explanation for Vancouver prices is that a Wizard did it.
Weren’t you saying the same thing back in 2008, 2010, 2012, 2014, etc? That worked really well for the young people who hold on buying and can enjoy cost-free living thanks to their multi-million dollar portfolios?
You’re absolutely right Space. They should have plunged into debt at already ridiculous prices five years ago, and lived like paupers, virtually prisoners in a home that takes up almost all their income just to carry. Think of how much equity they would have now! There must be an awful lot of rich youngsters walking around Canada today, who used to live in Vancouver, but cashed out after 5 or 10 years of incredible price growth and are now enjoying the fruits of their “investment”.
But wait! That’s not what happens is it? The same people who bought five years ago are still struggling under mountains of debt! They have a pile of home equity – perhaps $800K or more – but that mortgage payment is as big as ever. Ah well, only another 20 years to go. Home equity baby. That’s all any youngster needs. Besides, who are the pathetic losers who cash out of Vancouver when they could borrow against the equity and buy a second property? Why the hell didn’t I think of that?? It genius!!
But wait – doesn’t that increase their debt? If they keep borrowing against the equity to make up for the income they’re missing out on because it’s all pouring into the original mortgage, isn’t that kind of running up a down escalator or something? Ah, but what a stupid thing to worry about. The houses will always go up, and the debt will pay for itself. Who needs things like travel, hobbies, or nights out with friends? Fun is for bears, losers and renters.
Do yourself a favour and Google “pyrrhic victory”. Then come back here and gloat. Don’t worry, I’ll still be sitting here, burning in equal parts shame and envy, because in the time it took me to type this bitter (and obviously jealous) rant, you made probably $5000 in home equity gains.
I like you.
I have been saying it since 2005 and I have been right the entire time.
I don’t know what about that you can’t understand.
You mean you are right that Vancouver housing price is going to revert to normal via a housing price decline, and people are getting ahead via renting compared to owning?
By the way, your treatise on “Vancouver Man” a few months back was a masterpiece. I don’t think I laughed that hard at a blog comment since… well, since regular commenter ‘brian’ tried to explain in all earnestness why he did not feel grateful for Canadian citizenship, but that Canada should feel grateful that he came here. But really, that was a distant second.
@Raging Ranter – Jealous much? Sounds like someone is pretty bitter about all those juicy tax free equity gains homeowners got, and living life large.
Even if everything you say is true, they are still ahead of the regular wage slaves who rent and got basically got nothing to show for it after 10 years of hard work. If I’m going to be screwed and end up financial destitute, I would prefer to at least had some good experiences like round the world cruise, all kinds of lessons for my kids, travel, etc, than being a miser who worked and worked and at the end of all the sacrifice and misery, absolutely no better than the stupid owner who live and then bankrupted.
Space manages to get it completely backwards, doesn’t understand concept of opportunity cost.
…if I’m going to be screwed and end up financial destitute…
That’s my bet.
…absolutely no better than the stupid owner who live and then bankrupted.
So you admit that financial ruin is the eventual end for many of today’s indebted homeowners in Van? Because previously you argued that incomes could more than support Vancouver prices. Stick around Space, you’re catching on. You’ll be a raging bear in no time!
Nice quoting out of context… 🙂
“they are still ahead of the regular wage slaves who rent and got basically got nothing to show for it after 10 years of hard work.”
I have no doubt that this describes your financial plan.
I too have saved thousands of after-tax dollars per month by renting rather than holding a million dollar mortgage.
I can’t even think of how I could have gone 10 years enjoying dramatically reduced housing costs and in the end have “nothing to show for it.”
Thank you for enlightening us as to the source of your self-loathing.
“Most of my money I spent on whiskey and women. The rest I just frittered away.” -Cowboy investing advice
btw, about that median demonstrating distribution, I can honestly say that no bear on this blog have ever taken a basic stats course.
Series 1: 1, 1, 2, 2.4, 4, 5, 6, 6.6, 7 -> median: 4
Series 2: -100000, -56500, -44023, -3000, 4, 3000, 44023, 56500, 100000 -> median: 4
Are the bears seriously going to tell me that the median tells me anything about the distribution?? Really?? I guess all those people calculating stuff like standard deviation, skewness, kurtosis, and god knows how many complicated headache inducing stats measures just simply have too much time on their hands? Please read a stats 100 textbook before sprouting such non-sense again.
Go back and read my post again. I said median is a descriptor of distribution, but it does not tell you everything. Duh…
So median family income tells you how many high income families there are in Vancouver / GRVD as some of the bears on this blog claims?
No, but the data you provided the other day does. And there are very few of them.
Space is challenged by concepts requiring thought or reading. Throws jargon words out in effort to appear savvy. Fools no one.
So says the guy who has been basically wrong for 10 years, and makes claims using terms he has no understanding of.
Please specify terms I have “no understanding of”.
It seems you are able to demonstrate a Grade 8 understanding of population distributions.
Guess what they’ll teach you in Grade 9?
Oh, the places you’ll go!
says the guy who claims that median household income tells us about the distribution of household income and how many or how few high income household there are in the region.
Why don’t you actually respond to the fact that, per the data you provided, Vancouver has a tiny number of high-income households?
Nope I claimed that statistics canada plus your factbook tell us that.
wow, all the math genius and housing analysts are out in full force.
“Allowing our young to be first in line to buy preposterously overpriced RE, using large mortgages, will make them miserable, indentured wage slaves for life.”
This song has been sang since 2008, when you could buy a 1 bedroom unit in Yale town for $300k. Fast forward to 2017, 1 bedroom unit in Yale town is more less $600k. Luckily for Vancouverites vreaa was not a financial advisor.
Meanwhile, rent has been creeping up to $2200 for a one bedroom unit.
“The only ‘solution’ will be a bursting of the bubble, with a very large price crash, and a flushing out of all speculation in the market.
Such a price correction will return all properties to utility value, which is healthy.”
You are so desperate. Why don’t you join Jean Swanson team and run for election in 2018!
By 2028, I am sure you will be posting the same thing.
Let bring out all the charts, graphs, and more analysis, shall we !
I hear desperation but not on the part of VREAA.
Actually VREAA should be the envy of any of us. He/she is patient and clear-headed.
Like my Dad would say, plan the work then work the plan.
Meanwhile the bulls scream OH GOD HOUSES WENT UP WE ALL LOST MONEY.
What did you do with your money while housing was going up? How exactly did you lose it?
Other asset classes that have gone up in that period are too numerous to mention.
Did you invest in nothing?
Ah yes, the other assets have gone up more argument. So how much did you buy and how much did you make? Cuz, if you are that good, I don’t think a $5M dollar SFH would be much of an issue for you now? Should be just like spending $20 on an over-priced lunch.
I set myself some goals and am farther ahead than I expected to be.
Thanks mostly to The Everything Bubble that’s taken over almost every asset class in the world — not just our miserable mouldy bungalows.
Like many here I have more options than I used to, and one of them is to liquidate high-performance, modest-risk, tax-sheltered, dividend paying investments to stupidly buy into a stupid local housing bubble like a stupid donkey that has been hit in his stupid head with a round mouthed shovel.
But I wouldn’t do that if you had pictures of me blowing a thoroughbred Apaloosa.
I would rather take it to the track.
“What did you do with your money while housing was going up? How exactly did you lose it?
Other asset classes that have gone up in that period are too numerous to mention.
Did you invest in nothing?”
This kind of thinking is why stubborn bears pay rents for the rest of their lives and their children continue to be renters.
Do the home owners care much about the up/down and the investing on their primary residence? It’s fun to watch the number. They secure shelters for their family and their children. Do you understand the importance of this? If not, you are just hopeless. I hope your parents don’t move you kids around from one rental to the next, and don’t know what happens when the lease is over a year down the road.
“Actually VREAA should be the envy of any of us. He/she is patient and clear-headed.”
What does vreaa feed you? Like the other bears, VREAA has missed out the run for 10 years out of 15. I am just wondering how many decades does one live have!
“Do the home owners care much about the up/down and the investing on their primary residence?”
At 3-5 years’ income for a house, I would literally and gladly never think about it until the day I died.
I’d pay it off quickly and live there until it was my turn to take the Room Temperature Challenge.
Any considerations of property value would be for my kids to think about while the estate was being settled.
That is what housing is to me.
At THIRTY TO FIFTY YEARS’ INCOME, however, I simply no longer have the option to ignore the considerations presented here on VREAA.
Because in all housing markets everywhere that we have ever had data on, when houses are worth 50 years’ income it is a temporary phenomenon. They always stop being that way very shortly thereafter.
The practical implications of a catastrophic correction (which economists and statisticians and everyone but REIC members agree that we are almost certain to experience) can include:
-Loss of >100% of family’s net worth
-Mortgage can’t renew leading to personal bankruptcy and homelessness
-Inability to sell = inability to adapt to changing life circumstances
-Wife understandably leaves you for a guy who doesn’t have to take the bus to his meeting with his bankruptcy trustee
Pay attention now: Even if you only plan to buy a house as a dwelling and never to worry about its’ value you must study this market with great care prior to investing.
Because risk = probability * consequences
Because the odds are against a housing purchase in Vancouver in 2017 not leading to financial catastrophe by one definition or another.
You’re richer than you think:
Why does one need to be making huge money surfing the asset bubbles anyway? How does that enhance one’s credibility? Isn’t avoiding getting crushed by a massive financial shock that wipes out the debt-heads and stock jocks good enough? Timing is irrelevant when your goal is simply to avoid getting slaughtered with the rest of the sheep.
I got freaked out in 1999 and pulled out of the stock market. In retrospect it looks like I front-ran the crash by about 9 months and timed the market like a pro. In reality, I just got $hit scared, and my fear saved me from getting trampled with the rest. I had no short position. I did not predict the tech crash. But I was completely out of the way when it happened, and it never cost me a penny. Even my DC pension plan at work was totally in money market funds, I was the only person among 30 employees who could say that. All because I was a chicken$hit bear – a dour pessimist who couldn’t bring himself to buy into a bull market that had already run for years.
Never forgot that lesson. So the taunts of the perma-bulls never bother me. My money’s safe, with a very small short position to try to profit from volatility if and when it does happen. (Nassim Taleb’s barbell strategy – look it up). Bulls will challenge me for a forecast. “You’ve been wrong for ten years now!” No I haven’t. I’ve been right for ten years. I’m more right now than ever. Another five years of asset bubble growth and I’ll be righter still. The shock is coming. I don’t need to know when. That’s the luxury of being a bear. Sometimes the sky really does fall. Timing is for bulls. And they’re not as good at it as they think.
Raging Ranter speaks deep philosophical truths. The number one rule in investing is “don’t lose money.” The number two rule is “see rule number one.”
Ranter post is good post.
“Housing is for living, not for speculation” – President Xi Jinping
Has this guy been reading this blog?
vreaa wields influence!
a lovely thought…
@El Ninja – you are so funny….my data said Vancouver median household income is $92K. You & rest of bears claim it backs up your argument there are very few high income (eg. 200K/yr) households in Vancouve when that stats does nothing of the sort. And you asking me to tell you what you don’t know understand? Even after I demonstrated exactly what median does? Seriously?? hahahaha….
In the very document you referred us to, the distribution of income is clearly displayed. It shows that just 11% of Vancouver households (i.e. 30,000 of them) earn more than $150K a year. Almost half earn less than $50K.
I await your response.
That is 2010 data and based on StatsCan or Census which we know is not reflective of overall income distribution. If only 30K families earn $150K+ combined then how do you explain Burnabonian’s claim that there are 480,000 individuals making over $100K+/yr? That simply doesn’t jive. Unless everyone in the interiors are making the huge $$$.
This guy is failing at reading comprehension.
My source was StatsCan for all of BC. Only a subset of them live in Vancouver.
Slow down and if it helps, put a ruler up to the screen.
Try sounding out the big words.
Space provides data and, when not suitable, dismisses same.
@Raging Ranter – I love your argument….I put my $$$ all in money market and I was right for 10 years…never mind everything else went up like crazy, or even short term government bonds went up more with zero risk. And that kind of logic squares perfectly with Burnabonian’s argument about why not buying a Vancouver house was the right call too for the past 10 years. Just so perfect….
Man, you two should totally start your own hedge fund charge 5+50 like Renascence private employees only fund.
I think that you need to google Straw Man.
The desired strategy for a speculator is to buy something that goes up and then sell it.
Had someone bought in Kerrisdale in 1997 or bought Coca-Cola stock in 1930, then SOLD in 2017, they would be rich.
What you do not understand is that that strategy does not make all other strategies wrong.
Until you learn the difference between “I wish I had done things differently” and “You have done things wrong”, your contribution will continue to be confusing and contradictory and unhelpful.
After all, those who bought in Kerrisdale in 1997 then sold in 2017 made a terrible decision relative to buying Amazon stock. By your yardstick, they lost a fortune and are stupid and wrong.
Stop beating yourself up man. And stop beating us up.
“Regret is the only useless emotion.”
-a guy who sold his bitcoin at $100
I think it’s you who need to learn, given your constant bashing of home owners and claims that they would have done better if they didn’t buy an overpriced house and invested instead. Geez…I guess you don’t like when people throw your stupid logic right back at you to debunk your own argument about just how right you are.
Simple fact is house prices are higher than they are 10 years ago, so much higher that a 50% drop wouldn’t help people who followed your & other bears advice to stay out of the market. Telling people “oh but I was right because stock went up so much more, and fundamentals are on my side” is absolutely useless because they are now further away from their goal than ever. And you aren’t right. You are just plain wrong but refuse to admit it.
My only claims:
1) We are currently in a speculative bubble
2) I have been happy with my strategy for ten years
3) You struggle with reading comprehension
Do I think that owning now is a bad idea? Yes. I think that whether you bought this afternoon or in 1997, owning property right now is a bad idea because we are in an acknowledged speculative mania and those have historically always ended badly.
Do I claim to know when or how much this bubble will unwind? Absolutely not.
Simple fact is house prices are higher than they are 10 years ago,
Exactly right Space. And that’s why you and Fred and ‘brian’ and all the other perma-bulls each own your own tropical island, each surrounded by a harem of nubile and adoring nymphs, while I have to squeegie windshields to pay for sex. How can I not be bitter?
First of all, I haven’t seen any “bashing” of homeowners. Second, um, many investments have done better than housing. But that’s not the point. The point is that there are many paths one can take. And there will always be a path that, in hindsight, did better than the one you chose. That’s life. Deal with it and move on.
As I’ve said, investing is a forward-looking endeavour. All you can do is build a mental framework, based on your own reasoning and risk tolerance, and apply it to your decisions.
For some of us, our framework told us that Vancouver real estate did not represent the best allocation of our capital.
But, you say, property prices have risen in price! You were wrong!
To which I ask: Why have prices risen? Because of a deep strengthening in fundamental drivers? Or have they have risen on the back of massive, unprecedented, debt-financed speculation–something that no one could have reasonably predicted?
In other words, bears have been “wrong”, and bulls have been “right”, by SHEER ACCIDENT. And unless bulls sell and capture their gains (only a small minority of them will), in the end they’re no further ahead.
So, what’re you gonna do?
I stand by the use of reasoned frameworks because, even if it means I’ll “miss out” on speculative manias, over the long-term it should serve me better than the alternative (gambling).
Did I miss certain facts about the economy and demographics that should have alerted me – back in the mid-to-late 1990s – that Canada’s housing market was about to take off on a sustained bull run? Guilty as charged. The so called “echo” generation, now called Millennials and the largest cohort to swarm the market since the boomers, was just hitting their home buying years in the early 2000s. Something that – child mortality rates being low as they are – I should have seen coming. That bulge in the population pyramid was by itself enough of a factor to force up housing demand and prices. It really had a massive effect.
The second factor was my own generation, the Xers, who were faced with such a miserable economy for most of the 1990s that we put off buying our first homes. Generation X only started purchasing homes en masse when the economy finally improved in the late 90s, just when the generation that followed us was starting to do the same. This collision of two generations all competing for new housing stock at once had an epic compounding effect on real estate prices. Demographer David Foote saw this coming and wrote about it in Boom, Bust and Echo – published in 1996. I bought the book, then let it sit on my shelf until 2005 before cracking it open. (We bears really can be losers sometimes, I’ll admit.)
However, the market has far outstripped the fundamentals. Several reasons for that that do not require rehashing here, but re-hashing bear arguments is what we bears do, so here it goes: Ultra-low interest rates that just kept dropping for 20 years straight, but can go no lower. An increasing acceptance and comfort level among the population for carrying high debt loads. HGTV and the house porn effect. Then there’s BoMD – Bank of Mom and Dad. Well off boomers – collectively much wealthier than any previous generation of parents – started helping their kids with down payments and even helping them with monthly carrying costs in much greater numbers and dollar amounts than was previously the case. This created peer pressure on less affluent parents, who often dipped into their own home equity to give the same help to their kids. Then of course the whole obsession with “income properties”. While Gen Xers gleefully bought tech stocks (except for me, see above), then watched their nest eggs evaporate, Millennials focused their empire building and get-rich-quick schemes almost entirely on real estate. Their parents also got in on the game. The middle class is now heavily involved in “income properties” – once the almost exclusive domain of 1%-ers. As I mentioned above, this mass participation in the rental market was a key characteristic of the US bubble.
However, the fundamentals driving housing prices from approximately 1999 to the present are starting to turn over. The key demographic of 24-35 year olds has reached its peak, and will begin shrinking next year. Last time this demographic was shrinking was 1989-1997. Remember what housing prices did during that decade? Interest rates have bottomed out; the so-called “zero-bound” limit. So what’s left driving the market? Expectations. Bubble psychology. When that changes, look out.
Raging ranter is ON FIRE.
I know. Bears are always angry. They always find reasons to justify writing bigger and bigger rent cheques. I keeping telling them, calm down, angers are not healthy for blood pressure.
My rent’s gone up all of $50 in six years. Pretty sure the landlord’s expenses have gone up more than that. Rents here in Ottawa aren’t bad at all. Prices aren’t crazy here either, but price/rent metrics still favour renting.
Bears are on fire all right… full on denial of just how wrong they were, and all the humiliation and shaming they felt from home owners and relatives at party are all for naught, 10 years and counting. But in their vanity, they desperately need to prove that they were and still are right after all. Hence the argument about equity market doing better, despite the fact that without the same factors influencing housing prices, stock market wouldn’t be doing so good either. But never mind that! It’s different and equity market have much better fundamentals!!!!
Geez….reading Raging Ranter is exactly that…reading the raging rant of an ever despair and despondent person realizing that they just waited 5, 8, 10 years for nothing and even a 50% crash wouldn’t help them. Maybe 75% but I’m not betting money on it. Frankly, reading the bear comments are no better than reading those raging bulls comment. Except, at least the bulls can claim they were right about housing prices, and some of their thesis are now mainstream topics – like foreign money.
If this verbal diarrhea doesn’t signal #PeakBubble, I don’t know what does.
You also have a good run of verbal diarrhea yourself. Isn’t that also a sign of desperation? Ask your mom to put you in a bathtub and play with your duckie, you would see more bubble there.
The stream of brown liquid that flows down the leg of a “equity millionaire” who knows in his heart that his paper riches were nothing other than a temporary anomaly caused by a macroeconomic condition that has since passed, and that Canadian bungalows aren’t supposed to cost five million dollars for any reason, and that paying millions for some stupid shoe box in a small rainy city with no economy was as dumb as it sounds.
Diarrhea tends to come more explosively around assessment time, especially after a) interest rates have been jacked multiple times a year for years, b) loans have been stress-tested, further removing millions of buyers from eligibility for the Real Estate Casino, and c) China successfully has clamped down on capital flight removing hundreds of billions of dollars from the flow of money into overseas real estate.
(See also: Explosive Diarrhea, Shitting Bricks, Shit Sandwich, Up Shit Creek)
The only anger I see here are in the spittle-flecked diatribes of Space and Fred.
By the way Space, your buddies were interviewed in Toronto Life Magazine last March. Wonder how they’re investment properties are doing.
“Even more sky high!”
Space & Freddy, try this:
1) Read comment.
2) Think about comment.
3) Respond to comment.
Right now, no matter what I post, I get variations of the following:
“Stoopid renter. Yor just angry cuz you rent.”
“Yoo’ve been rong for 10 years man. Why should I listen to yoo?”
“Rents doo at the end of the month looser. Pay up or get out.”
“Go play with your duckie.”
“Owners rule, renters drool!”
If the housing market is being sustained by shining lights like you guys, I am growing more confident by the day.
Your kinds of posts have been around since 2004. Like I said, you guys keep singing the same song over and over. Many 🐻 blogs have folded since.
Your items in quotes are exactly it.
My neighbour’s doctor told her to quit smoking 40 years ago. She remains bullish on tobacco and bearish on medical advice. According to your logic, she’s right and the doctor is wrong.
The kind of hubris Space and Brian spew is, in my opinion, a signal of the top. We saw it in the 90s, when anyone who doubted dot com valuations was laughed out of the room. We saw it in the U.S. in 2006. And we saw it in last year’s presidential race, when traditional media assured us that the odds of a Democratic win were “98%”.
And then it dawned on me. Space and Brian are literally this blog’s Hillary. Dull. Mainstream. Incapable of addressing the arguments against them.
When this bubble bursts, and the streets have run red in real estate blood, they still won’t get it. They’ll blame everyone but themselves. Just like Hillary. They’ll probably even publish their own version of “What Happened”. Lol.
Oh, so you are like…trump, the guy who has everything backward. No wonder, you failed miserable.
The Toronto market is down 20% from April, but the perma-bulls there won’t admit there’s anything wrong. How long until it’s Vancouver’s turn? Will you be like Hillary supporters, insisting they were right all along even a year after having your ass handed to you? By the way, Trump ripping up NAFTA probably isn’t a risk factor you bulls took into consideration is it? Cuz houses will go up in Vancouver no matter what. Just like in Toronto.
The market will always do what it have done. Its up, down, and sideway are just beyond anyone control. There is no point to live in fear. This is what bears do best, dig out negative news and spend their lives in fear. Look at the market correction in 2008, 2012/13 and what happened next? It got to new high.
It will be no exception this time. With the new stress test coming in, there might be another correction in 2018, and we are due for one anyway. However, add two points on top, but extend amortization to 35 years, it’s awash. People don’t hide under their blanket like the bears do due to negative news. Lives go on!
Fear is one thing but risk management is another.
If you hold a mortgage that can reasonably be expected to go deeply underwater for a long time, you are taking a risk.
If you bought something using leverage that tends to be subject to dramatic price fluctuations, you are taking a risk.
Not a fear, a risk.
I rode motorcycles for 20 years. I didn’t ride in the rain and I didn’t ride without my gear.
I was not afraid of it but I recognized it as a risk.
I took steps to understand the risk and to mitigate it according to my personal goals and risk tolerance.
When all the drivers started texting, I sold my bike. It was outside of my risk tolerance envelope.
My work requires the same approach.
Why would I handle a million dollar personal liability any differently?
That is so funny….so so funny… the RE bulls are full of hubris?! When they have been right year after year after year for over 10 years, they are full of hubris for their believes which has been right.
But bear’s conviction of an imminent RE crash that fails to materialize every spring for the last 10 years, and constant advice to people to sell / not buy, and anyone who bought in the last decade is a speculator or dumb are what? Level headed, logical, and thoroughly researched? Seriously?
If any bulls expressed impatience, exasperation, and anger, it’s simply they can’t believe there are people who are so stupid, and /or so full of themselves that they can’t ever even consider they are wrong and so badly wrong. It’s like someone who insists it is raining and dark out and even after you drag them out to a full sunny day, they still insist that they are right, it’s just you and everyone else who don’t see it. And how dare you ever question their claim.
I rest my case.
Apparently, most of the 400K+ high income earners in BC don’t reside in the Metro Vancouver which is the largest economic region in the province, but rather resides other parts of the province like Prince Rupert? Golden? 100 Mile House? All pockets and communities of silent, under the radar high income earners.
And I’m sure my IT contractor friends who charges $75/hr for 40-50hrs/week for at least 45 weeks+/year, while declaring only $40K or less in T4 income are happy in the knowledge that they don’t count as a high income earner in bear’s eyes because their T4 income is so damn small.
Sorry SpaceCase, but StatsCan data is from T1 — all sources.
Space, learn the difference between a T1 and a T4. Then talk to us about incomes. Unless you’re suggesting your IT buddies don’t declare their income at all. In which case they are tax evaders i.e. criminals.
I have no quarrel with any bull who got in and got out and is sitting on a pile of cash. He is smarter than me.
That type of bull doesn’t seem to exist, though — or at least they do not post here.
Most bulls here either state that they are holding Van RE now, or (so much the worse!) wish that they could get in now and are actively trying to buy.
Past performance is what it is but as of right now this asset class has a nonzero probability of going very negative for a long time for a variety of very well established reasons.
Don’t take my word for it; ask an economist or a central bank or a hedge fund or a regulator in any country in the world including our own. They are not bullish on Van RE and frequently state as much in articles and warnings to investors.
My opinion remains that to continue to hold is madness and to be trying to buy is financial suicide.
As mentioned earlier, investing is a forward-looking exercise. Your current position and current strategy are all that matter.
Could I have bought in 2005 and sold this spring and now eat nothing but lasagna made from thousand dollar bills and white tiger’s blood? You bet.
Does that mean it makes sense to own any Van RE right now? Not on your life.
It’s interesting that you classify people as bulls or bears, in the sense that the language of the bears in their comments actually sounds like the language of people who believe that markets can be timed.
We bought a condo in Surrey in 1992, and then a house in East Vancouver in 2006. The objective in the first case was to buy a place to live, and get into the real estate market. The objective in the second case was to move closer to an aging relative, and get out of a strata property.
There was a financial goal, secondary to buying a place to live – it was research that said homeowners had a net worth 30x on average of that of renters. WeI did not buy property as a vehicle to generate wealth, but with the idea that at the age of 80 + we might have to move to an old folks home. The hope was that there would be a chunk of equity that we could tap, outside of government pensions and retirement savings that would finance a decent assisted living facility at a time of high demand due to demographics.
There is risk of loss in any investment. The literature and history of investing warns strongly against trying to “time” any market. Warren Buffet advises against it. Garth Turner, whom most of you are familiar with has been a real estate bear since what? 2009 if not earlier. An eight year track record of being incorrect, and this is an intelligent ex – politician with a thriving investment advisory practice. He can’t time this or any market.
A bull who sold out three years ago, would be sitting on a pile of cash. They would not have gotten an argument from any of the bears about their timing. Their “timing,” was dead wrong. Now they are waiting for a 50% correction.
There is timing risk in any investment. The timing risk cannot be eliminated, but can be substantially reduced by having a long term time horizon. If you invested in the Dow Jones index in 1967, you would be flat in 1981 – a fourteen year time horizon. A long time to wait to get your money back, with some modest dividends and look what you would have made in government secured interest, or on a single family home paid off in deflated dollars.
You are accusing people of being bulls, when you are accusing them of being failed market timers. You yourself are trying to be a market timer, and I wish you luck with it. People with a long term time horizon will on average do better. You have to be prepared for the worst and ride it out if necessary.
Interesting as well that a real estate crash is seen as a financial end of days. The U.S. real estate and financial market crash was the worst since the Depression. Government action did bail out holders of all kinds of assets. It’s hard to believe that the Canadian government would fold its arms in the face of a real estate crash in this country, and turn a deaf ear to all those homeowners with a high propensity to vote. The market could correct or crash substantially, here or elsewhere. Timing it? A mug’s game.
I haven’t seen any assurances from bears as to the exact timing of anything. All they’ve said is that the current state of the market appears, and indeed has appeared for many years, to not offer an attractive risk-reward proposition. I’ve gone further, perhaps, in predicting a significant crash, but I don’t know when exactly it will happen, if at all. I just think it’s more likely than not.
Buffett, who you mention, advocates “buying when others are fearful, and selling when others are greedy”. I think we can agree that if one thing has defined Vancouver RE in recent years, it is greed.
You seem to dismiss the severity of the U.S. crash, and of a prospective Canadian one, while asserting that the government will magically rescue homeowners. What planet do you live on? Do you know how many people lost their shirts?? How many trillions of dollars were lost? How painful that was for a lot of families? Do you think the government can create wealth out of thin air? That the measures they took didn’t come at the price of a devalued currency, greater debt, taxes, and a delayed reckoning? If you think the government can save us, you are deeply mistaken.
Buying and holding over a long time horizon only applies to value investments.
At $2k/square foot for a teardown you are not describing a value investment.
Buffett never advocated buying wildly overpriced assets that have been divorced from fundamentals for a long time.
In stocks I am a value investor and if I were buying housing as an investment I would be a value investor there too.
There is NO VALUE INVESTMENT in Van RE. Assets there are dramatically overpriced by any measure.
I truly believe in Vancouver RE and at 3-5 years’ income I would have bought and never thought about it again.
If you think that it still has a sustained upside (which you must if you insist on trusting your net worth to it) you are a bull in my book. And insane.
Everyone is timing the market in one way or another; what the old saw about that being impossible is referring to is timing it over the short term — days or weeks or months.
“You can’t time the market” doesn’t mean “buy the most overpriced asset you have ever heard of and wait many decades and you will do well”. That is nonsense.
Citing the US as an example of how the government will come to the aid of homeowners is like citing the Holomodor as an example of how a government will prevent a famine. They rescued the banks. They rescued the brokerages. They rescued the hedge funds. They tried to rescue homeowners with a million different policies, and only succeeded in making it worse. Millions of Americans today are still poorer than they were in 2007 as a result of the crash. In Orlando for example, 1 in 10 homeowners are still underwater ten years later. And those are just the ones who managed to keep their homes. You probably don’t realize it, but you just gave us your version of “The government won’t let housing crash”.
I won’t even bother pointing out that the US government just happens to own the world’s reserve currency, so they were able to print their way out of what otherwise would have been a severe depression, exporting any troublesome inflation to the far corners of the earth. Surely you understand that Canada is not capable of pulling off a similar QE feat? That our loonie would not hold up like the USD did?
When you argue that one should never try to time the market, you are simply restating the realtor’s mantra: “It’s always a good time to buy.” Tell anyone in Toronto who bought a home in February, March or April of this year that timing the market is unimportant. They’ll show you a $250K hole in their budget that proves it is. Garth and the stock jocks over at Greater Fool make the exact same philosophical error when it comes to equities markets. “Don’t worry about the timing, just buy.” That works for years. Or decades. And then suddenly it doesn’t.
The government can and will have a huge impact on the market. Case in point – Foreign buyers tax. Stopped the increases in the high end SFH market, by reducing liquidity. Second case in point – B.C. Liberal first time homebuyer assistance program, condo market took off – within months of the cooling of the SFH, by adding liquidity.
The government has massive borrowing power, which it used in Canada in 2009 to add liquidity to the financial system, you may recall Harper’s massive deficits. The consequences to taxpayers will be kicked down the road as per usual government strategy in the western world. Only Paul Martin seems to have been able to turn the tide, and only for a short time.
The government can reduce interest rates in a crisis, it can allow longer amortizations, it can reduce down payment rules and it can increase provisions for mortgage insurance. It can increase immigration, and it can dictate their financial status. It can sell Canadian citizenship to wealthy investors. The property transfer tax can be reduced or eliminated. Governments have levers they can use in the market, with dramatic effect.
For decades we have seen measures that have been communicated as affordability solutions – RRSP loans, increased amortization to 40 years, reducing down payment stipulations, interest rate cuts. They have all resulted in increased prices, in almost all parts of Canada. The government has many tools it can use, and homeowners will be screaming for politicians to take action if we run into crisis.
Every one of those things you mentioned, the government is either already doing, or has done but is doing no longer. Because it’s terrified of being on the hook for the consequences. Don’t assume that the same things that threw gasoline on the bull market will be enough to douse a raging bear market. Canada did manage to prevent a bear in 2009 with a massive liquidity injection into the banking system. We had a surplus going into that crisis. Let’s see that work a second time.
You are also making some erroneous assumptions. 1) That interest rates can go much lower. In fact they only recently came of their their zero bound limit. That’s why the last two BoC reductions – in 2014 and 2015 – were not fully matched by the lenders. Recall that interest rates dropped massively in the US in 2009-09, to no avail. 2) That the Canadian government has the same virtually unlimited ability to borrow and spend as the US. As we saw in the 1990s – particularly December 1994, when we very nearly experienced a failed T-bond auction that would have thrown us into an insolvency crisis – the Canadian government has no such unlimited credit limit. Sure, we could monetize the debt (QE) but nothing like the US could. How would a smaller nation fare under a housing collapse?
See Ireland. One day they were the Celtic Tiger. The next day they were just another starving feral cat lumped in with the flattering acronym PIIGS.
You are quite right to suggest that governments will cook up new and expensive ways to appear to rescue the middle class from its own house lust. And at some point those reckless policies likely will put a floor under the collapse. But experiences in Ireland, Spain, the US, and elsewhere show us that doubling down on the same reckless policies that create housing bubbles will not stop the bubbles from bursting.
“I haven’t seen any assurances from bears as to the exact timing of anything. ”
Did you happen to make a 50% crash prediction in two year in 2015 to Brian? Couple threads back, Brian was still holding you to it.
“You seem to dismiss the severity of the U.S. crash”
Your favorite USA, you could get 105% LTV; while in Canada, try 80% LTV uninsured. Again, I encourage you to go to a bank, talk to a loan officer, to get the information. It’s free, and they would not bite you off.
“I have no quarrel with any bull who got in and got out and is sitting on a pile of cash.”
Yeah, these sellers have been out of luck trying to get back into the market. Sitting on a pile of cash is just useless in this market. And they become sourgrape permabears.
“Most bulls here either state that they are holding Van RE now”
Again, don’t get mixed up between primary residence with investment properties. Most home owners don’t care the up and down, it’s fun to watch the numbers.
“‘Does that mean it makes sense to own any Van RE right now? Not on your life.”
Bears ask this question all the time. I am sure you can dig out the same question in this blog back to 2008. You guys keep singing the same song all over. Buy what you can afford, where you can afford.
“We bought a condo in Surrey in 1992, and then a house in East Vancouver in 2006. ”
Most home owners started out this way and moved up the chain gradually. Not for the permabears though, they want a fancy house in point grey with a white fence or nothing.
“Most home owners don’t care the up and down.”
“Sitting on a pile of cash is just useless in this market.”
Sitting on a pile of cash is the only successful outcome. Unless you have found a way to eat home equity?
“Again, don’t get mixed up between primary residence with investment properties. Most home owners don’t care the up and down, it’s fun to watch the numbers.”
What does that mean. Anyone who doesn’t get their money from a trust fund cares when their net worth oscillates up and down unexpectedly by hundreds of thousands or millions.
“You guys keep singing the same song all over. Buy what you can afford, where you can afford.”
What does that mean. I can afford a kilo of cocaine but I don’t think it’s a good idea to invest in one. I can afford a leaky condo on leased land but you don’t see me buying that either. Investing in property (or buying a home) has a little more to it than just “buying what you can afford”.
“Most home owners started out this way and moved up the chain gradually. Not for the permabears though”
What are you talking about. If you are saying that the purchase of any housing in the lower mainland puts you on the path to real estate riches, you are exemplifying the concept of market bull with absolute perfection.
Easy to say you “don’t care the up and down” after a 20 year bull market. Ask the folks in Toronto who bought last year how the up and down feels.
A humble submission for one of VREAA’s future title images:
gentlemans and ladies, this gots to be thread of the week, enjoy … http://tinyurl.com/y8jy72mk
I remember a few years back (maybe 5 or more) when some Chinese investors bought all the big lots on Cambie near Queen E for $3.5M while similar lots were going for $2.5M to local established developers. Everyone was incredulous, including politicians from City Hall about how these Chinese cowboys don’t know how things work in Vancouver, Community Amenities Contributions, etc, and how this will set a bad precedent and blow up badly in their faces. Well, looking at the same area now, seems like those Chinese investors who overpaid $1M/lot are making a pretty dime on their over-priced purchased.
Just because it’s expensive to you doesn’t mean it’s expensive to them. And, seriously, if you have been wrong for 10 yeas+, not just timing wrong but spectacularly wrong in both timing and magnitude, you should really be going around lecturing people who at least got the direction right. Seriously…you should examine yourself, not why reality didn’t prove you right or why others can still be so stupid.
And crying a crash year after year after year doesn’t make you a genius if there actually is a crash, especially if the crash takes price down 50% but still above the price when you first cried CRASH!
I have been spectacularly wrong about Vancouver RE in the same way that I have been spectacularly wrong about the lottery.
Also, seriously bears, take a damn course, or even if you are that cheap, borrow a Stats 100 textbook from library and actually read it. Follow that by some basic modelling / simulation textbooks. Really, I’m totally serious. It will do you guys a world of good.
We should listen to El nino; he is a smart one. Oh wait, is that the same guy who could not survive in this town and has to rent somewhere else? The same guy who predicted 50% crash in 2015? If you permabears claim you make $250K a year, with ton of cash stuffed in the pillow, find a good realtor and a mortgage broker, they will help turning your life a around. They won’t bite you, and won’t cost you a cent.
Time to ask your mama to put you in the bathtub, and play with your duckie, El nino; there should be plenty of bubble there.
What is it with your fantasy of me in a bathtub?
it’s your own fantasy with bubble! Now I know, you are a pervert and delusional individual, a very typical bear behaviour!
RR killin em softly
Weren’t you lecturing us on kurtosis and skewness the other day? The two most meaningless measures in all of statistics? Did you know that statisticians don’t even bother calculating kurtosis and skewness anymore? That they haven’t in 30 years? Because those metrics don’t tell you anything a cursory glance at a histogram won’t tell you. Ever since the graphical user inteface was invented, there’s been no need to calculate kurtosis and skewness. What’s more, kurtosis will vary from sample to sample, even from the same population. It’s an entirely useless and misleading measure. Yes, please take a course, Your stats knowledge is 40 years out of date. I build time series models for a living. All they do is tell you that what happened yesterday will happen tomorrow. They keep senior management happy. Comforting for perma-bulls. Useless for any real life decision making.
Raging Ranter CLEANING HOUSE.
Killin em softly
I suppose this is the sort of government intervention the bulls are thinking of when they say that the Canadian government will never let the housing market correct. But a quick look at Denmark’s household debt levels shows that trouble is brewing in in “the world’s happiest country”. Chances of Denmark avoiding a major reckoning for its fiscal profligacy? Zero. Chances for a positive outcome for any of the top ten on that chart? Similarly grim. To believe otherwise is to believe that this credit expansion cycle – unlike every other credit expansion in history – will never end. Even Norway, with it’s trillion dollar sovereign wealth fund, does not have an unlimited capacity for debt.
Canada’s debt to GDP ratio is 92%, in the U.S. it is 106%. We have room for more leverage. As you point out, interest rates have gone negative in some jurisdictions, which could improve liquidity. It’s had mixed results for those countries.
The policies in the U.S. and other countries did put a floor under the collapse, but you fail to point out that they have had substantial differential results in different markets. Homeowners in Orlando are still underwater, but Manhattan condos are at an all time high.
If we can avoid the argument that Manhattan is a world class city and Toronto and Vancouver are boring Canadian backwaters, I would argue that in the event of crash Vancouver would be more likely to track the Manhattan price curve than the Orlando one that you cited earlier. That tells us a Vancouver purchaser today with a ten year timeline could be at better than a break even point assuming a U.S. style crash.
BTW, the mortgage stress test policy is a tightening of credit/liquidity which I have been on record all along as saying is the necessary factor which bursts asset bubbles. I believe that we are starting to experience a market correction. The X factor is the role alternative/sketchy lenders will be willing to step in to cover the financing cut represented by the new OSFI guidelines.
It’s important to be ready for any scenario. Will we have a U.S. style crash? Even Garth Turner tends to shy away from that characterization, I suspect because of banking and mortgage policy differences. I know a lot of homeowners with a lot of equity will not panic sell. It’s a life stage decision for most people, and selling happens late in the game.
You’re citing government debt only. Total household debt has exceeded our entire GDP. That’s excluding corporate, government, and financial sector debt.
“I know a lot of homeowners with a lot of equity will not panic sell.”
Irrelevant. There will always be forced sellers due to circumstance, and prices are set at the margin.
“If we can avoid the argument that Manhattan is a world class city and Toronto and Vancouver are boring Canadian backwaters . . .” By “avoid the argument,” do you mean “deny the facts”? Sure, deny ’em all you like.
“I know a lot of homeowners with a lot of equity will not panic sell.” OK — though if “no one has a crystal ball” (the realtard’s mantra), then it’s hard to “know” what a very large group of people might do in circumstances not yet determined, including steep reductions in their equity. The more immediate question is, what will Joe Local condo flipper do? Or Jane Local who is hoarding houses while dreaming of densification? Will they dispassionately conclude that “there is room for more leverage”? — which is the attitude they’ve had as long as prices have been rising.
In terms of a price recovery, people with sufficient equity/paid for homes are hugely relevant. In Vancouver 71% of real estate equity is held by people over the age of 55 – a significant stabilizing factor. Markets in the U.S. that are still underwater have tons of supply – remember pictures of streets with a for sale sign on every house, all built within a couple of years.
Markets that have recovered are major cities where demand has returned to the long term situation. Vancouver has a thirty year history of high demand, and is mining existing properties for increased density in a fully built out situation.
Prices are set at the margin, in the short term. How many forced sellers in Florida’s secondary real estate markets, vs the big American cities. Try googling record real estate prices, and attach the name of large American city – I tried Boston, San Francisco, San Diego and Manhattan. All have set new all time highs within the last two years. Less than ten years after the price trough, new highs are being reached.
After the financial market crash, blue chip stocks recovered first and fastest. The same principle will apply to real estate. Vancouver may correct or crash at any time, the factors that make people want to live here and invest in real estate here will remain.
Keith. Are you a realtor? Serious question. Because you really sound like one.
Please stop comparing Vancouver to San Francisco, Manhattan, etc. They’re apples and oranges. Those cities possess actual, robust economies. Vancouver is more comparable to Portland in economic stature (actually, median incomes in Portland are significantly higher, as I pointed out recently).
Your view that the government can orchestrate orderly bubble deflation is naïve and without evidence. The U.S. “recovery” you point to so enthusiastically is artificial, at least in part. Their housing bubble has simply been re-inflated by a massive, historically unprecedented, and unrepeatable injection of liquidity (i.e. printed money). Valuations have expanded while fundamentals haven’t kept pace. Ask the average American if they’re better off. They’re not. There’s a reason Trump got elected.
Your view that homeowners will simply “ride it out”, thus limiting price declines, is similarly naïve. First of all, you are purporting to speak for masses of individual strangers whose behavior you have no way of foretelling. You don’t know how a change in the RE market, or the broader economy, or some other event will influence their psychology and their behavior.
Second, even if most of them do nothing, as you assert, it’s the sellers at the margin that count. Those who hold on will sit helpless, watching the equity in their homes evaporate while the motivated minority dictates their fate. That’s how price setting works.
As for Vancouver retaining its appeal through a crash, let’s see how investors feel about throwing money at deflating assets.
Equating Vancouver to a “blue chip stock” is good for a chuckle, though. That’s right up there with “the Swiss bank account of global real estate”. Vreaa, surely Keith’s “blue chip” analogy is a candidate for your running compilation of creative bubble linguistics.
I am a semi retired retail clerk. I said “avoid the argument about that Manhattan is a world class city” because frankly it’s been done to death on this and other blogs. I’m fed up with hearing about the culture and business blah blah blah. I’ll restate it this way, Vancouver is a world class city in terms of real estate demand and price to income ratios. Fair enough. I won’t bore anyone with the reasons why Vancouver is so popular, if that is why the real estate is so high. That’s the blue chip argument. I won’t get into the speculation argument, we can be sure it exists but no one has been able to explain either the exent or the precise impact on prices.
I haven’t said anywhere that the government will orchestrate orderly bubble deflation. That’s impossible. I have said in the event of a serious enough crash in prices homeowners will pressure the government to do something about it. As will developers, construction companies, bank presidents, real estate agents – the list goes on. With that kind of financial and voting pressure, action will be taken.
All economic consequences due to government action are by definition artificial. Governments intervene in markets all the time (see the global aerospace industry including Bombardier) and have done so for thousands of years. Government has plenty of borrowing power (see Warren Buffett’s views on debt and deficits in the tens of trillions owed by the U.S.) That can will be kicked down the road for a while.
The good news is that the stress test will likely create a strong correction for a start, I would guess 15 – 21% is in the cards. Then we will see what the reaction of three levels of government turns out to be. I know that if Vancouver real estate fell 50 – 60% I would continue to live in my house, until I need to move to something suitable for an older person. Long way away. I’ve enjoyed looking at my property tax assessments in the last two years, but my reaction has been how lucky I have been, and how sad for younger people. I leave the smug narrative of being savvy, working hard and all that stick for people with ego.
If Vancouver is the same as Portland, why don’t people move there in drove? Why people keep moving here and demand more houses? Despite low taxes, Portland still remains a sleepy town. If permabears cannot see this simple things, no wonder a failure you are.
And permabears think when the market takes a correction, the homeowners would sell the houses, and put their families on the street? Please put your heads back to the sand.
Now, it’s time for more data, fancy charts and graphs, and US bubble too.
Fred mocks “data”, “charts”, favors mortgage broker as source of insight.
Markets that have recovered are major cities where demand has returned to the long term situation.
What happened in the US after the recovery is irrelevant to our discussion. You are taking comfort in how well major US cities recovered, conveniently ignoring the hell they went through over the past 10 years to get there. Citing some long term hypothetical future real estate recovery when Canada has not even experienced its real estate correction yet entirely misses the point of even having conversations about overvalued real estate.
Stating that “most people” have sufficient equity in their homes is like saying that “most people” won’t die in a flu pandemic. In the US, at the absolute peak of the crisis, 8% of US mortgage holders – not home-owners, just those who still had mortgages – were in default. That was what? Maybe 5% of total homeowners? Yet it was an economic catastrophe that continues to reverberate around the world even ten years later.
So yes, you’re right, we should feel entirely confident buying already expensive real estate today. To do anything else would be “timing the market”.
I knew I’d screw up an href tag sooner or later. The link is here:
3150 Gravely St: a stunningly stupid new house with all the hominess of a morgue on a topographically challenged lot nowhere near Skytrain. 3 mil for this garbage? And the ludicrous pretentious arbor in front is illegal; testimony to the idiocy of this Triple Blech “executive” house by Noort.
2750 Pender St E: listed at more than a million over last assessed. Maybe it’s a typo. No way would a rodent “buy a listing”.
[Guardian] – ‘We stand to wipe out a whole era’: how the 1970s could vanish from Vancouver: The Empire Landmark Hotel is the latest brutalist icon set to be demolished in a frenzy of property speculation. Is it wrong to destroy an entire decade?
…”For nearly 40 years from his vantage point at the top of the Empire Landmark Hotel, Yunus Khan has watched Vancouver grow up. “You would barely recognise it,” he says of the city as it looked when he took his first job at the hotel, doing maintenance. Beyond the 42nd-storey window, the jagged silhouette of the North Shore mountains, the lush surprise of Stanley Park, and the cobalt passage of Burrard Inlet are just about the only landmarks that remain unchanged.
“These are all new,” Khan says, indicating a cluster of condo towers and the ultra-modern Sheraton Vancouver Wall Centre further south. Construction cranes rise around them. “Any older building you see now, it’s going. They break it down, make a high rise.”
What the view from the Empire Landmark offers is perspective: on the Canadian city’s past, present, and future. But not for much longer. The hotel, a downtown Brutalist icon from the 1970s, closes for good on 30 September. It will be demolished to make way for a proposed luxury condo development.
Khan plans to retire. He won’t miss the 60-mile round trip commute from the outer suburbs, or the frantic pace of life downtown. “Vancouver used to be a small town, easy,” he says. Now, you see all these tall buildings with the glass, it looks a bit more beautiful. But it is very difficult to live here.”…
[Guardian] – Google’s plan to revolutionise cities is a takeover in all but name
…”Aside from the institutional investors shopping for entire city blocks, Alphabet understands the real audience for its cities: the global rich. For them, the narratives of data-driven sustainability and algorithmically produced artisanal lifestyles – Sidewalk Labs even promises “a next-gen bazaar” replenished by local communities of makers – are just another way to justify rising values of their property portfolios.
That Alphabet’s “urbanism as a service” might not appeal to the residents of Toronto does not matter. As a real estate project, its chief goal is to impress its future missing residents –above all, millions of Chinese millionaires flocking to Canada’s housing markets. Doctoroff was not equivocating when he told the Globe and Mail that Alphabet’s Canadian venture “primarily is a real-estate play”.
Alphabet’s urban turn also has a broader political significance. The courting of Alphabet by Canada’s politicians along with the bidding war that has erupted over Amazon’s second North American headquarters – some cities have offered it incentives to the tune of $7bn to relocate there – suggest that, despite the growing backlash against Silicon Valley, our political classes have few other positive (and, as importantly, cash-positive) industries to draw upon.
This is clearly the case with Canada’s prime minister, Justin Trudeau, who has recently pitched his country as “a “Silicon Valley, plus everything else Canada is”. In one respect, he is certainly right: it has been Canada’s pension funds that turned real estate and infrastructure into the lucrative alternative assets they are today.”…
The everything bubble.
Nice graphic. But the Canadian numbers must be a typo. By what measure would housing have gone from a value of 36.3 to 413 in 7 years? Not even Van and Toronto did that.
Speaking of an everything bubble, I cannot understand how the allegedly upper crust individuals who populate the Gator Drool blog (name changed to protect the innocent) think that a “balanced and diversified portfolio” of financial assets is so much safer than housing. Sure, you can sell it at the click of a mouse. But so can everyone else. And the algos can click their “mouse” in the overnight market before you even awake. The 30th anniversary of Black Monday, rather than serves as a warning, merely gave an opportunity for various pundits to explain why it’s different this time.
That jumped out at me, too. Can’t be right.
Little doubt in my mind that equities are in a bubble. PE ratios are at historically elevated levels. Confidence maxed. Volatility low. Netflix trading at 240x!
One of Trump’s biggest mistakes has been to take credit for this market. He has touted each new high (even as he called the market a ‘bubble’ in his pre-election days). When the market turns, and it will at some point (that’s what markets do!), he will be on the hook.
Right now I don’t know where to invest. I’m sure there are some value opportunities somewhere in the world, if you look hard enough. Maybe Vancouver real estate? I hear it’s a bargain.
Then there’s this:
Pass our tax cut or the stock market will collapse. I don’t think I’ve heard a dumber argument since… well, see above. Either they’re dumb enough to believe that a massive tax cut will keep the party going until 2021, or they are conveniently setting up the Democrats and recalcitrant Republicans in Congress to take blame for the inevitable bubble burst.