“I have been contacted by two of my realtor friends in the past week both proclaiming that the market is turning and that this is a good time to buy.”

“I have been contacted by two of my realtor friends in the past week both proclaiming that the market is turning and that this is a good time to buy. One of them even mentioned that interest rates will be rising this Friday. When they tell me this I argue that they should look at the ten year average. Sales are still around 20% lower than the ten year average and this is with major banks advertising mortgate rates under 3%. If you compare stats between spring 2012 and 2013 it is like comparing chicken manure and cow manure. Yes cow maure is better than chicken manure but it is still manure. One of them had the audacity to say: “You better get in now I bet you five years from now people will say that Spring 2013 was the real estate bottom.” Hearing this I had to refrain myself and asked him to google “Asset bubble graph”. Where we are now is called the “Return to ‘normal’ phase aka “bull trap”; and guess what comes after next? As a matter of fact the Vancouver real estate market is following the graph quite closely. Never bet against human nature. I may be wrong but I highly doubt it. I think we will know for sure by this time next year. Unlike most bulls I know, I am putting my money where my mouth is. I am not buying now even though I have a down payment ready and could afford the mortgage without straining myself. In terms of real estate it will be an interesting rest of the year.”
– Waiting to exhale at VCI 7 June 2013

“I explained that if the present rate of price appreciation continued that same house would be worth $92 million in 2051. He astounded me by responding, yes of course. That’s why he was buying a second house.”

“My idiot neighbour.
In his mind “real estate ALWAYS goes up”. When I tried to explain to him that Vancouver was in an unsustainable bubble situation and he said I was crazy. The example I used was a westside special that I know was purchased in 1969 for $38,900 and sold in 2010 for $1.89mm.
I explained that if the present rate of price appreciation continued that same house or 50×120 piece of dirt would be worth $91,800,000 (that is Ninety One Million Eight Hundred Thousand dollars) in 2051 and asked him if he thought that would be the case.
He astounded me by not even blinking and responding, yes of course. That’s why he was buying a second house. At that point I made the decision to leave Canada.”
– Bob at greaterfool.ca 12 Mar 2013 9:25pm

“I have continuing conversations with a friend who spent just under 1 million for an East Van home…”

“I have continuing conversations with a friend who spent just under 1 million for an East Van home.
6 months ago he thought prices would never come down for detached homes in Vancouver.
3 months ago he admitted that West side home had come down but not on the east side. After all, the west side was overvalued compared to the east.
This month he talked about re-financing their mortgage so they could take on more debt and do more renovations on their home.
sigh.”
– b5baxter at VREAA 12 Mar 2013 10:28am

‘Vancouver Is Awesome’ “Community-Based Social-Venture” Blog Actually A Stealth Paid Promoter Of Olympic Village

Above from a 12 Feb 2013 post on the ‘Vancouver Is Awesome’ site

“Marketers of the in-receivership Olympic Village are paying the editor of well-known local culture webzine VancouverIsAwesome.com to blog about the joys of life in the village – but it does not say on the website that he is being paid to do so.
Rennie Marketing Systems awarded the deal after receiving a single pitch from VancouverIsAwesome.com editor Bob Kronbauer, who says feels like he won a contest to be paid to flog the Village in False Creek – much like the public contests held by Vancouver International Airport and Tourism Richmond to find paid bloggers to promote them.
“I was visiting the Village a lot as a resident of Mount Pleasant before we moved in and fell in love with it and wanted to share the stories of all the positive things that make it great,” Kronbauer said.
“Beyond the budget and all this stuff I really have no idea about as an average citizen, (I wanted) to sort of expose stories about what it’s like to actually live there.”
Kronbauer lives in a market rental unit at the $1.1 billion complex, marketed by Rennie Marketing Systems, but declined to disclose his rental rate. He began a $2,475 per-month, six-month contract in May 2012 that was renewed in November. The year-long gig is worth a total $29,700.
“Beyond this, beyond my contract to promote the Village, we’ll be staying there in our suite because we love it so much, that was the intention to move there,” Kronbauer said.”
– from ‘Life in the Village pays off for local webzine editor’, Bob Mackin, Business in Vancouver, 14 Feb 2013

Elsewhere in the same BIV edition, Glen Korstrom suggests this is part of a broader trend of media manipulation by the real estate industry:
“Such tactics seem to be part of a trend of real-estate marketers manipulating media perception to sell condos.
Business in Vancouver has learned that VancouverIsAwesome.com editor Bob Kronbauer is being paid by the in-receivership Village on False Creek, formerly the Olympic Village, to promote life in the village – even though nowhere on his website does it make it clear that he is being paid to do so.”

“Vancouver Is Awesome, and we are dedicated to everything that makes it that way.
A community-based social venture sharing positive stories of arts, culture, lifestyle, and everything awesome about Vancouver. No bad news.
If you want to read ugly, bad news about this beautiful city of ours, you’re going to have to look to traditional media and other blogs; V.I.A. promotes everything that makes our city awesome, from old to new and everything inbetween. We’re like the human interest piece on the news… only different.”
– vancouverisawesome.com
—

We’ve previously tried reading the V.I.A. blog, but each time we break out in a terrible rash and can’t continue.
Advertising is irritating enough when it’s clearly advertising; when it’s in a stealth ‘product-placement’ form, far more so. And the ‘trend’ of media manipulation by the Vancouver RE industry is something that has been going on for years, it’s only coming to light now because the current state of the market makes people ‘ripe’ for the realization.
For the record, we ourselves aren’t paid anything, by anybody, for anything we archive, post, or say on this blog; it’s a labour of love and morbid fascination. We actually pay a small fee to wordpress each year to keep ads off the blog.
When news is “bad”, we call it “bad”; when something is “ugly”, we call it “ugly”; and that’s precisely how the RE market here looks to us right now – ugly.
A grand spectacle is playing out in our town, and we’re keeping notes.
– vreaa

If you are interested in developing your own ideas about the truth of the Vancouver RE market, and whether it is ugly or otherwise, read as broadly as you can about the market. If you don’t already do so, make sure you also consider the opinions expressed in posts and discussion on the following sites:
Vancouver Condo Info
Whispers From The Village On The Edge Of The Rain Forest
Vancouver Price Drop
Vancouver RE And Then Some
Housing Analysis
The Economic Analyst
and, of course,
Vancouver Real Estate Anecdote Archive

“I was talking to a retired teacher today in Vancouver who owns a leaky condo. She says “You wait till spring arrives prices are going up”.

“I was talking to a retired female teacher today in Vancouver who owns a leaky condo. She says “you wait till spring arrives prices are going up”. She thinks Van will not see any further declines. I asked her where she gets her info from, she said, “experience”. It would seem she doesn’t realize we are in a different world than the one we experienced during the last boom and bust at least as far as I understand.”
– AprilNewwest at greaterfool.ca 20 Jan 2013 6:25pm

“Person two said that the apparent downturn in sales and values in Vancouver is largely illusionary because it is only real estate at the top end of the spectrum that has slowed, which is artificially skewing the statistics in the mid-range.”

“Last night I was listening to the following discussion about the Vancouver housing market. It went basically like this. Person one said that real estate is coming down in Vancouver. Person two said that the apparent downturn in sales and values in Vancouver is largely illusionary because it is only real estate at the top end of the spectrum that has slowed, which is artificially skewing the statistics in the mid-range, and that homes in the midrange and below are still selling well and have not slowed. Is this accurate? Personally, I was going to say that he was not correct but I did not have the exact statistics to back up my claim. Where are the statistics on each market price segment?”
– Mark W at greaterfool.ca on 18 Jan 2013 at 10:25 pm

Not so long ago we heard the reverse argument: that the high end market was special, and resilient to price drops.
Each sector of the market, whether categorized by price range or by geographical area, may take different price trajectories peak to trough. Condos or SFH, Richmond or West Vancouver, Central or Peripheral – price paths will have different shapes.
Regardless, in the end, each sector will have lost very similar large percentages. No subgroup will be spared.
We continue to anticipate 50%-66% drops in real prices peak to trough, across all property types.
– vreaa

“At a BBQ at the inlaws’ place back in May, they and all their suburban friends were patting each other on the back about how awesome it was to own property that kept going up and up and up.”

“I just recently found out my inlaws are planning on selling their house in Surrey. In April, a near-identical place across the street sold for $520K. Another near-identical (neighborhood/cul-de-sac built by the same builder in the 70s) went on the market late June (just before OSFI and Flaherty brought in the new mortgage rules), sold last month for $450K.
Back in May, was at a family BBQ at inlaws’ place, they and all their suburban friends were patting each other on the back about how awesome it was to own property that kept going up and up and up. I said (because I’d had a few drinks, won’t do this again…) “Yeah, money’s never been cheaper in Canadian history and real estate’s never been more expensive but yet people still think real estate is still going up.”
It was like I’d said “pull my finger” then farted like a trombone solo. Dead silence, imagine a pin dropping in slow motion.
I’ve been half-assed trying to tell my wife’s parents that they should think about cashing out, y’know, on the house they bought in 1979 for $25K, since at least 2010. Oh, god forbid that anyone who isn’t a homeowner AND is under 40 could possibly know anything about financial planning.
Let me just say it’s gonna take a lot of willpower to not say “I told you so” as their house languishes on the market through to 2014 because “It’s worth more than $450K”, but hey, keeping my mouth shut is cheaper than a divorce lawyer. :->”
– EinsatzgruppenVancouver at VREAA 2 Dec 2012 12:32am

The loneliness of the RE bear.
Wrong and ignored on the way up; vilified and ignored on the way down.
Only masochists need apply; and only those who value truth over social ease.
BTW, that property has already dropped more than 13% in market value.
– vreaa

‘Time Magazine’ Asks Bearish Questions About Our RE Market; Canadian Readers Indignant

[Image from Time Magazine]

“For some time during and after the financial crisis, it was fashionable to point to Canada as a paragon of fiscal and regulatory prudence. …
For the past year or more, Canadian officials have nervously watched as household debt levels has risen to worrying heights, fueled by increased mortgage borrowing. …
Just like in the U.S., housing prices in Canada steadily rose in the decade immediately preceding the financial crisis, soaring 198% over ten years. They dipped slightly during the global recession, but bounced back quickly between 2009 and the beginning of this year, fueled in part by a low interest rate policy the Bank of Canada put in place to nurse the Canadian economy through the global economic slowdown. Real estate prices have risen so high, in fact, that many housing analysts believe the bubble is about to burst. Housing economist Robert Schiller told CBC news in September, “I worry that what is happening in Canada is kind of a slow-motion version of what happened in the U.S.” …
Indeed there are signs that the party is already over. Due in part to efforts by the Canadian government to strengthen lending standards, home prices in Canada nationwide dipped year over year in October, and declined in many of the key local markets as well, according to a recent report in Reuters. ”With cooling evident in several major cities, speculation has turned to whether the slowdown will be a soft landing or a crash,” the report said. …
A report from the CMHC released yesterday stresses its health and ability to stay solvent in the event of a downturn, and the conventional wisdom is that the Canadian real estate market will go through a rough patch and nothing more. But anybody who was paying attention during the American housing crisis can remember similar assurances, which turned out to be just plain wrong.”
– excerpts from ‘Oh No, Canada! Are We Watching Another North American Financial Crisis Unfold?’, Christopher Matthews, Time Magazine, 30 Nov 2012
—

The majority of comments below this article, as of 2 Dec 2012 p.m., are noteworthy for indignant hubris. When one sees terms like “laughable” and “little doubt” being used to describe positions, one should be particularly vigilant. Also interesting that the author and the publication are accused of sensationalism and “trying to generate a tempest”:

“I find this article to be almost laughable.” – SwiftrightRight

“There are no liar loans – no masses of new construction sold to people who used to live in apartments for no money down. Because everyone who holds a house holds equity of at least 20%, as opposed to the millions in the US who held equity of zero, there is not going to be a raft of abandoned mortgages even if the market does turn down significantly.” – Lord Byng
[Wrong. Everyone who owns a house does not have “equity of at least 20%”. -ed.]

“Time is trying to generate a tempest here. Some Canadian housing markets are overheated – Toronto, Vancouver – but this is generally concentrated in the absentee condo buyer class. Our tighter standards (actual proof of income, a credit history, you know, actual standards) pretty much guarantee that if house prices do fall, it means some people will [live] in their houses longer before selling.” – rpratt039

“Just last week we heard that Canada’s Central Bank Governor Mark Carney had been enticed to go over the pond and try to save the British economy. For the first time a foreigner is going to head the venerable Bank of England. That tells us about the current state of the Canadian economy and the man who had stewardship over it. Sure we are having a hiccup right now but the underlying economy is very sound.” – PonnTharmaratnam
[Tenuous logic. -ed.]

“There is little doubt that if left to its own devices, Canada would continue on the path of fairly stable economic growth. However, we must bear in mind that more than a little of today’s economic turmoil is rooted in subjective human psychology as well objective economic performance. … For this reason it is regretable that this writer, hoping for the career advancement that would come with writing a sensational piece, chose to strike out in this journalistic direction. I would recommend more substantial topics for future articles.” – sverry7
[Yes… Let’s discipline Chris when he comes up in front of the committee, shall we? The audacity! -ed.]

“The very notion of Canada having a real-estate collapse similar to the American one is highly laughable.” – K.Navaratnam
[What percentage of this individual’s net-worth is in Canadian RE? -ed.]

“I still have kids living in BC who refuse to believe that this is anything more than a hiccup in the Canadian market.”

“My family sold my mother’s old Vancouver West house in November 2011… a year ago. Thank god all three of us siblings agreed to sell at that time.
I still have kids living in BC who refuse to believe that this is anything more than a hiccup in the Canadian market! (I live in the US)”
– JimH at greaterfool.ca 30 Nov 2012 8:48pm

“When I was in their office last week, I overheard the conversation of a realtor saying his friends have bought homes to flip and they are all stuck with them now. He said the market has fallen so fast, it’s so different from the actual stats.”

“He [a local realtor] says the market is good and he is busy. That’s not what I’m hearing from my realtor friends up at Macdonald realty. In fact when I was in the office last week, I overheard the conversation of a realtor saying his friends have bought homes to flip and they are all stuck with them now. He said the market has fallen so fast, it’s so different from the actual stats. So, by the time you see the HPI move downwards, the market has actual moved much more.” – HAM at RE Talks 28 Nov 2012 10:57pm

Robyn Adamache, CMHC market analyst – “Vancouver is down 9% from the 2011 peak.”

“On the CBC Radio Early Edition this morning [13 Nov 2012], a few minutes before 7:00 am, Rick Cluff interviewed CMHC market analyst Robyn Adamache, who will be speaking this morning at the CMHC conference in Vancouver. No mention at all of a bubble, and the typical positive spin — “market may decline 1% in 2013” — but there were a couple of interesting things. She said Vancouver (I’m assuming broadly across the Lower Mainland) is down 9% from the 2011 peak. I’m assuming she has access to comprehensive and current data not generally available. And at the end of the interview, with Cluff pushing her pretty heavily on whether now was a good time to buy, given the price slump, she adamantly remained on the fence, and wouldn’t state an opinion. Rather interesting if you’re saying, at the same time, that the market will be stable in 2013.
There may be some followup stories in the local media about the half-day CMHC conference, although I doubt there will be any great revelations, or admissions of any impending serious problems with RE. Given CMHC’s role in all of this, they are probably controlling their message pretty carefully these days.”
– Froogle Scott, via e-mail to vreaa, 13 & 14 Nov 2012

“We are in fact like a mini Manhattan/.. Yaletown, one of the boroughs within downtown Vancouver/.. Vancouver is the Swiss bank account of international real estate/.. Just too strong for any sort of bubble circumstance to happen/…In Vancouver you can today buy a condo, and have 40 people lining up to try to rent that condo.”

CAMERON McNEILL: “Whenever the market goes near the top part of the cycle we always do hear pessimistic economists talking about bubble, et cetera. But the reality is that the fundamentals that are driving the market below the surface are just too strong for any sort of bubble circumstance to happen.”
—

CAMERON McNEILL: “We are in a, in fact, like a mini Manhattan and people want to live in this dense population.”

CHRIS BROWN: “There’s been a culture shift in Vancouver, he says. Living in smaller spaces is seen as okay. For many people, including families, getting along with less space is expected, even desirable.”

CAMERON McNEILL: “In Yaletown, one of the boroughs within downtown Vancouver over my shoulder here, just 10 years ago you wouldn’t see a baby carriage. Today they have six or seven daycare with waiting list and they’re happy to have the coffee shop as their living room, they’re happy to have the park as their backyard and they’re happy to have the seawall as their playground.”
—

CAMERON McNEILL: “The fact of the matter is in Vancouver you can today buy a condominium, you can rent it out and you will have 40 people lining up to try to rent that condominium. They’ll be paying a very, very high and a fair rent. If you have that much desire for people to — to live in a condominium, you know, I think that the market’s got no problem sustaining itself.”

CAMERON McNEILL: “I always say Vancouver is the Swiss bank account of international real estate. It’s a — it’s a funny little quote that I say because sophisticated people, whether they live in Vancouver or they’re international, they — they recognize Vancouver as a safe, long-term place to park some money when it comes to real estate.”

CHRIS BROWN: “In the months to come that assertion will be tested. Are we looking at a bubble that’s bursting or a boom that’s just had a little hiccup?”

– excerpted from ‘Vancouver Housing: Bubble or Bust?’, The National, 20 Sep 2012. [Transcription generously provided by ‘AP’.]
—

Other excerpts from this CBC previously archived.
These quotes headlined here, for posterity.
– vreaa

“A few months back, when I told my landlady, as I often have in the past, that I think prices will fall, she said, “Why would they?”

“[The National piece] resulted in “bubble” and “crash” being said on TV. And that will be enough to change the tone of the conversation and make people think about whether we might be at the top.
A few months back, when I told my landlady, as I often have in the past, that I think prices will fall, she said, “Why would they?” That’s the attitude that has propped up prices: the failure to even consider price drops. Once that bedrock belief is brought into question, nature will be free to take its course.”
– N at VCI 21 Sep 2012 8:55am

Speculation in reverse.
We agree that, once Vancouverites see that prices can fall substantially, the (superficially) ‘virtuous’ cycle that is a speculative mania, will turn vicious.
– vreaa

“Here’s a message from me to the current owners of the foreclosed house I will eventually be buying: Please put in gas appliances! I hate electric stoves!”

“Here’s a message from me to the current owners of the foreclosed house I will eventually be buying:
Please put in gas appliances! I hate electric stoves. Also would like a few fireplaces, a hot tub in the back yard and maybe a new fence surrounding the property. If you have money to spare (before going bankrupt), please be sure to include new windows, light fixtures and maybe even a new deck (wood please).
Thank you.”
– ScubaSteve at VCI 11 Sep 2012 3:48am

In a similar vein, our friend ‘westsidefrank’ on occasion quips with his wife and friends: “Our kitchen is being reno’ed right now…” (even though he believes he’s still years away from buying a home). – vreaa

“Last year, my friend was asking me what to do with her house in Van West, I said sell it, she said the market will keep going up.”

“Last year, my friend was asking me what to do with her house in Van West, I said sell it, she said the market will keep going up. I gave her all the reasons behind it, and now I was at a BBQ on the weekend, and my friend said to me, “You were right, the market is going down.” Finally, someone believes me!!!”
– Finally at yattermatters.com 1 Aug 2012 1:42pm

“Second friend turned around and said that there is no way it’s going to crash in Vancouver, since San Francisco never crashed.”

“Was at a friend’s wedding last night, with a group of friends. One asked me if I am going to up-size from my current place to a bigger one. I said no, since market is crashing, and gave him most up to date stats -50% in sales compared to last year and -10% in price in last 5 months. Second friend turned around and said that there is no way it’s going to crash in Vancouver, since San Francisco never crashed. I was bit a buzzed from gin and tonic so couldn’t remember exacts stats for San Francisco. Then the first friend jokenly said that second one bought a third property not too long ago and is waiting for it to be built.
At that point I told them that lets not talk about real-state since it’s an emotional topic and I didn’t want to upset anyone, and lets enjoy the wedding.”
– SunBlaster at VCI 29 Jul 2012 10:33pm

“A 27 year old colleague of mine bought in Whalley in late 2009, claiming that it would be the new Yaletown.”

“A 27 year old colleague of mine went out and bought in Whalley in late 2009, claiming that it would be the new Yaletown.
My other bearish colleague and I almost laughed when she said this during a staff meeting, as he actually lives in Surrey. She was so proud that she wrote in the office log “off to get my mortgage approved for my first place – smiley face”
She is married to a guy that works at the bank, and they have since bought another place. They are renting the Whalley place, and claim that their rent covers their mortgage payment. When questioned further, they didn’t factor in property taxes, insurance, and strata fees..
I cannot wait till this twit gets burned…”
– SKS at VCI 25 Jul 2012 8:12am

Bear Wins Bet – “Earlier in the year a bull at my work asked me for my prediction for house prices for end of 2012, to which I said 10%-off and he immediately bet me $100 so I took it.”

“Earlier in the year I mentioned a bull at my work, who knows about my bearish views asked my prediction for house prices for end of the year, to which I said 10% and he immediately bet me 100 dollars so I took it.
He came up to me fri and said looks like I might owe you 100, so we kind of got into theories about what is causing the recent declines and he believes it solely has to do with the global economic troubles, namely Europe.
He believes the uncertainty is causing people to slow down buying.
I go on to explain the exact same thing I told him a few months ago, locals over extending themselves and local incomes do not support prices and the recent mortgage rules magnify how sensitive locals economic health are.
But no he still believes what he believes and says I focus only on facts and not the “fuzzy things” his words, such as everyone wants to live here, no land, growing demand etc.
Sigh”
—
“(When he suggested the bet) he got so frustrated debating me that he basically said fine whats your prediction, I said 10%（which I thought was conservative) and he was the one who suggested we bet $100.
He was so sure of himself I think he thought I would have backed down after money was on the table and all the people listening to our conversation.
At the times he had a little group of bulls around him and they all thought I was crazy. Most of those bulls are in the bear camp now. Although I don’t believe they really know the extent of what is to come, they just parrot what they hear in the MSM currently and right now that is bearish news.
This is a smart guy too, and had sold in 08. I think he felt he lost out and never should have sold then because prices dropped but of course shot back up to new highs so he now believes Van RE is bulletproof.”

– 4SlicesofCheese at VREAA 8 Jul 2012 at 1:15am and 9:13am

Bets can be fun, and socially important (they often serve the purpose of modern day duels!), but, as we all know, that’s not where the real ‘betting’ is happening.
– vreaa

“Are you a landowner in Pitt Meadows?” – “No, a happy renter while the market collapses.” – [Laughing] “That won’t happen!”

“I was just walking into the IGA in Pitt Meadows, where the front page news is property taxes squeezing pensioners and fixed incomes.
There out front of the store stood an older gentleman beside a table, with signage relating to the hot topic and asked me if I was a landowner in Pitt Meadows, I blurted out without a thought “No, a happy renter while the market collapses, which will sort the tax issue at hand.” The man burst out laughing and proclaimed “That won’t happen!”.
May I note that adjacent to this IGA are the foundations for a 388 unit condo building. They’ve got the posts up for the signage to face Lougheed, but the marketing placards aren’t up yet. At the same time, behind the IGA, there is a rezoning app for a 97 unit residential mixed use, all within arms length of 4 other condo/townhouse developments that appear to be certainly under six to eight years old.”
– from Aldus Huxtable, via e-mail to vreaa, 8 Jul 2012

“Here’s some bearish banking gossip for you as you wait for the Vancouver RE price decline…”

“Here’s some bearish gossip for you as you wait for the decline. A friend of mine, who used to work in banking, called his old boss who is now in Alberta. He called her about the mortgage changes because he is gleefully waiting for prices to deflate and wanted to solicit her opinion. She said something along the lines of hang onto your hats. The banks (like hers) may choose to no longer offer 30 year mortgages on non-CMHC-insured mortgages. They are intending to comply not just with the letter of the OFSI guidelines but with the spirit of what Flaherty is trying to achieve. That’s because…
Apparently, the word on the street is Flaherty got wind that BMO was about to launch a 5-yr mortgage at 2.09% and he flipped. He was already pissed at the endless development he was seeing in the Toronto condo market and the high level of speculation. He called all the bank heads into a meeting and told them to cut out all the shenanigans. Then the next day, to everyone’s surprise, he announced the end of the 30-yr amortizations.
This nice-lady-at-the-bank has been declining HELOCs and mortgages ever since. Everything iffy that comes across her desk is getting kaiboshed. She thinks Alberta will get creamed if other banks are doing what she’s doing.”
– mac at VCI 25 Jun 2012 8:46pm

“My in-laws have now lost, based on average prices, just over $80K on their 2011 purchase. They claim, however, that they could get about $100K more for their place today than when they bought it. Strange.”

“My in-laws (who purchased a modest place in the Sunrise-Hastings area of East Vancouver just over a year ago, have now lost (based on average prices) just over $80K. They claim, however, that they could get about 100K more for their place today than when they bought it. Strange.”
– oneangryslav2 at VCI 12 Jun 2012 4:19pm

“I know a young couple who bought a 400K condo assignment in Vancouver. In discussion they generally deflected, avoided or otherwise tried to bury their heads in the sand. If it wasn’t so sad, it would have been amusing. However, I came to observe a few things…”

“I know a young couple who bought a condo assignment (for a 400k condo in Vancouver). The condo will be finished sometime next year. They are both moving to rural Alberta for a year or two to earn a lot more money to pay off the wife’s student loans for dentist school and the mortgage. They leased another car (SUV) recently so they can drive there. They are not going to rent out the condo when it’s finished because they wanted a new place. They have also extracted all their RRSPs (with maybe help from parents) for a down payment.

In the discussion with the husband and family that followed, (as expected) they generally deflected, avoided or otherwise tried to bury their heads in the sand. If it wasn’t so sad, it would have been amusing. However, I came to observe a few things.

1) They have no idea how the market works.

When I told them that house prices may be down, and listings were up, the responses were:

“I don’t care about house prices, of course those are going down, but condos are still going up or holding their value.” Huh??

“The reason there are so many listings are that people are just seeing what they can get for their houses, they’re not trying to sell.” Uhh? Apparently it’s free to list. (Both in time and money.)

2) They have no clear idea how debt works.

The counter to “when prices correct to 50%..”, was that at that point, it would just be cheaper to “upgrade”. I was shocked. In a debt-equity relationship, when “equity” goes down, you first lose value in your equity, not in your debt. In fact, you never “lose” your debt. I used 5% down as an example, and he didn’t realize that at the end of 5 years, unless everything they both earn are paying for the mortgage, that a 50% drop would mean that they’re probably 30% underwater. They will have NO equity to “upgrade” if they can even renew their mortgage. At this point, he disregarded that and went back to his example of how if his condo was worth 200k, he could still…

3) They use select anecdotal evidence only, with no statistics or any other information to back their opinions.

Sometimes these pieces contradict themselves — I don’t see how they could not see it.

“My friend works at the RBC and approves of mortgages. There’s a lot of cash only buyers from China.” … I thought cash-only meant they didn’t need a mortgage…

And of course the standard “housing prices always go up”. Anything that shocks them, just gets deflected and any statistics are ignored and rationalized by some made-up opinion.

4) They don’t understand the relationship between “home” and “equity”.

“We don’t see this as an investment. We plan to stay there long term, at least 5 years. If you want to start a family, you will have to buy a place, you won’t be able to time it.”

Yup, the standard arguments. It’s almost like they all have the same script. Anyhow, I wasn’t cruel enough to break it to them, but they ARE using it and treating it as an investment. If not, they would not talk about using the “equity” in the condo to upgrade. At the end of the day, they do plan for their place to have “value” in it. Otherwise, what’s wrong with renting? (See next observation…)

5) Any alternative is seen as impossible.

No no no… no talking about renting. “Well, if I were to rent, I’ll have to deal w/ having to find a new place when the landlord kicks me out. That’s a hassle and represents time. And time is money.”

I really wish no one coined the “time is money” bit, it’s always misused. Time represents sweat equity (maybe) which maybe translates into money.

I was also not cruel enough to point out that the inconvenience of renting is probably a lot lower than the inconvenience of being homeless, but I kept it zipped.

I’ve shown them graphs and blog entries and videos already. I’ve done my good turn already. I don’t expect them to change their minds on the spot, I am just hoping it’ll give them something to reflect on — that doesn’t fit in their current world view. Perhaps that difference might mean being poor compared being homeless.

As has been said here before, speculative mania can turn regular people into crazies…”

– RE Lurker at VREAA 11 Jun 2012 3:35pm

‘Thoughtful, Well-Published Local Economist’: “The rats are leaving the ship. I am fairly confident this is what is going on. Can’t wait to pick up the wreckage…”

“Speculation is rife that Vancouver real estate is sliding down the drain.
Wondering, YatterMatters Tweeted this question: “With thousands of listings on the market why are Vancouver home sellers selling?
In what seemed like the mere passing of seconds came a response that wasn’t from a Vancouver home seller.
“The rats are leaving the ship” followed by this adjunct saying, “I am fairly confident this is (partly) what is going on. Can’t wait to pick up the wreckage…”
These words are bold! So bold that you begin to question if these words are representative of a current mind set for Vancouver home buyers. If so, what does this foretell current Vancouver home sellers and does this mind set explain ‘in part’ the limited number of Vancouver home sales?
My surprise at reading these words rests in the fact that I am acquainted with the respondent in real life. The words “can’t wait to pick up the wreckage” seemed at odds with the person whom I respect as a thoughtful, well published local economist. What I didn’t anticipate was the fierceness of their words carrying a tone of carnage. It was something I had not anticipated!”
– Larry Yatkowsky, local realtor, at his blog ‘yattermatters.com’, 5 Jun 2012

The post at Larry’s site provoked good discussion. At one point Larry himself commented:
“In 1990 people were buying at about the same ratio as today but today they are not buying at 3.09%/5year rates versus 14% – WHY?
Is it job security, income/mortgage payment ratio, world economic balance, price difference, fear?
What am I missing?”
—

Some RE bulls imagine thousands of ‘thoughtful’, measured prospective buyers ready to line-up to buy Vancouver RE at 10% or 15% off.
In a similar vein, they can’t imagine thousands of upright owners deciding to sell at the same time. (“Why would they sell a depreciating asset?”, they ask.)
So, yeah, if you don’t really understand the dynamics of a bubble (fresh air between stratospheric prices and fundamental support far, far below), if a 15% pullback is the most you can imagine, you’re going to be a tad surprised with the effects of a deflating speculative mania.
Previously orderly demand/supply dynamics go ‘non-linear’.
Buyers sit on their hands (even those who thought they’d step in).
Sellers come to market (even those who didn’t previously think they’d be sellers!).
The crux is that the fantasy of ever-increasing home prices leaves the building, and that changes everything.
– vreaa
—

Inventory Up; Sales Down; Prices Softening – Fate Of Market Still “Uncertain”?

– chart care of b5baxter at VCI, 31 May 2012, who adds “Inventory has reached another milestone. It is at the highest point in the past ten years for this time of year. It has also passed the 2010 peak for the year. Only 2008 peaked higher out of the last ten years.”
—

– chart care of Larry Yatkowsky at yattermatters, 1 Jun 2012, who adds “Vancouver’s detached average home prices continued a slow retreat from February’s high of $1,235,244 receding to a current average price of $1,073,331 down 12% YOY. Two years of gains are on the block as this market approaches the low not seen since November 2010 when the average was $1,043,161.
…Active listings are at an all time high… up 23% YOY,… with sales down 24% YOY…”.
—

“Vancouver’s real estate market has taken another interesting turn, with listings up and sales down during what is usually a busy time of year.
In May, average prices for houses have dropped about $150,000 compared to one year ago. That 12-per-cent drop wiped out two years of price increases.
The reason appears to be that too many more sellers are trying to cash in at the same time. Listings are up by 23 per cent, but fewer are buying: sales are down 24 per cent.
“Probably, on average, about a 150 or 160 homes in Vancouver are reducing their price every day in the hope of catching, getting ahead of the train and maybe get out before they can’t,” said realtor Larry Yatkowsy.
Predictions of a bursting real estate bubble have swirled around the Vancouver market for years. Despite the indications, economist Tom Davidoff, of UBC’s Sauder School of Business thinks it’s too early to name it yet.
“It’s going to take several months of data-confirming of what we seem to be seeing before I would be anywhere close to be prepared to say, ‘That’s it, we had a bubble and now it’s bursting,’” Davidoff said.
– from ‘Uncertain fate for Vancouver real estate prices’, CBC News, 2 Jun 2012
—

The most straightforward way of explaining the evidence at hand (prices compared with fundamental measures such as income, rents or GDP; ownership levels; household debt levels; market price/inventory/sales action; etc.) is that Vancouver has suffered a lengthy speculative mania in housing, and that the bubble is now very likely in the early stages of collapsing.
– vreaa

The Night Before The Morning After – “Within my half hour walk through the downtown core at 11pm last night I overheard three groups of staggeringly drunk people conversing, arguing and yelling at each other about real estate, renting and mortgages. It was a tad surreal.”

“I had the fantastic endeavour of walking through the downtown core at 11pm last night [Saturday 2 Jun 2012]. Within my half hour walk I overheard three groups of staggeringly drunk people conversing, arguing and yelling at each other about real estate, renting and mortgages. It was a tad surreal.
I was entirely sober, walking home from a late work meeting. I usually treat myself to a walk and a listen to an album from start to finish, but on a weekend late night around Granville, it’s not the time for headphones for safety reasons.
I’ve never heard conversations like this before. Women yelling at each other that “it doesn’t matter if I can’t afford the payments one day, I can always go back to renting” another young man saying to his friend “no way man, I just want a place that’s worth $500,000. It’s gotta be worth $500,000″
To hear one conversation, no big deal, coincidence, to cover twenty blocks and encounter three passing conversations seems worthy of mention.”
– Aldus Huxtable at VREAA 3 Jun 2012 8:59am and onwards

Coming next: Morning-after guilt; regret; shoulda-coulda-woulda; nausea; incomplete recollections; rewritings; “what-happened-to-my-wallet?”; blame; denial; repulsion; resolutions of abstention.
– vreaa

“When my family and I were pondering a move out of Vancouver, the line I heard more than once was “Don’t sell your house, you’ll never get back in.” It almost made sense, until I looked at the mountain of cash we would be leaving town with. For now I remain a Vancouver homeowner. The abstract concept of my net worth remains a fictional number.”

“Real estate is a hot topic these days amongst my neighbours. We’ve all heard the stories of little bungalows along the Cambie corridor selling for north of 2 million dollars. These were homes you could buy for a third of that before the construction of the Canada Line system was announced.”
“Where does it end? That unfortunately is a scenario we humans are not all that good at seeing. If it is indeed a bubble, it will remain invisible to all those but a chosen few. Those few will be madly blogging about it and preaching their gospel of “sell now” at cocktail parties, desperate to be proven right. And even if history does prove their predictions about a real estate crash to be correct, we’ll still find them annoying and usually find a way to avoid them at the party.”
“The cruel truth is that a bubble does not become visible until that bubble has popped, leaving drops of soapy fluid on the ground that we will be slipping and sliding on for years (as we make our way to the bank to renew our mortgages at a higher interest rate, realizing just how much money we owe on a property that suddenly doesn’t seem as sexy as it once had).”
“Last year, when my family and I were pondering a move out of Vancouver, the line I heard more than once was “don’t sell your house, you’ll never get back in.” It almost made sense, until I looked at the mountain of cash we would be leaving town with. Thankfully I haven’t had to make that decision yet… and the abstract concept of my net worth remains a fictional number.”
“So for now I remain a Vancouver homeowner. At least I know where to buy a carpet for cheap. [See body of article for context.] I should ask why they’re shutting down the business though. Maybe they know something I don’t.”
– from ‘The Persian Rugs Going Out of Business Sale!’, Martin Strong, at City Caucus, 30 May 2012 [hat-tip Nemesis]
—

Many Vancouver homeowners ‘know’ that this is a bubble; they see that the price run up is just too ‘good’ to be true; yet only a very small percentage will capitalize on this windfall before the bust. Most will be unable to overcome the inertia and the inconvenience of selling. And, that aside, it’d only take a relatively small percentage to try to sell at the same time for the market to collapse.
It is very, very difficult to run against the herd. On the way down, of course, the herd is selling…
Martin is correct about the bears being seen as irritatingly annoying by the general citizenry. Witness Larry MacDonald’s article in Canadian Business that we headlined yesterday, where Larry asks the bears to simply go away. As today’s anecdote shows, it’s irritating to have people tell you something that pertains to your circumstances, that you know in your heart is likely valid, but that you can’t bear to act on. Like a large version of being asked whether you shouldn’t get that overdue term paper finished when the big game is on television.
And for how long is the “can’t-tell-its-a-bubble-until-it’s-popped” canard going to be in such wide circulation?
It is very clear that you can identify a bubble from the inside: a market is in a speculative mania when prices clearly divorce themselves from fundamental values, and continue upwards solely because new buyers expect ongoing price strength. That’s a bubble. Capisci? (The bears do!)
Anyway, Martin shows that he has a remarkable amount of understanding about what’s going on, even to the point of talking about what it’ll be like after the bust (“realizing just how much money we owe on a property that suddenly doesn’t seem as sexy as it once had”). He also shows excellent insight in referring to his current perceived wealth as an “abstract concept” and his net-worth a “fictional number”. After the pop, he will doubtless say that he “knew” it was a bubble, and he actually ‘did’. But his own wishful thinking and the seduction/threats of the herd (“you’ll never get back in”) will have prevented him from acting on that which he knew. This is how bubbles work. Powerful, eh?
– vreaa

“I just overheard a startling conversation while I was waiting for the bus at Broadway & Cambie. A couple was exalting over the fact that the interest on the “huge” amount of money they could borrow was only $1400 a month.”

“I just overheard a startling conversation while I was waiting for the bus at Broadway & Cambie (apropos “subprime”) – a 35ish couple just on their way home from an open house/discussion with mortgage broker. The female half of the couple was exalting over the fact that the interest on the “huge” amount of money they could borrow was only $1400 a month. She was quite excited over the fact that they would only have to pay the interest if they had money challenges at any time (aka – all the time). Neither of them seemed to think that interest rates would ever change from where they are now and that if they did experience “challenges” they could just pay the interest until they could sell for a profit. I am always amazed by how many of these delusional individuals there are, it really does not bode well for the future.”
– Observer at VREAA 6 May 2012 5:03pm

“Is your daughter still renting? Why doesn’t she jump in?”

(Conversation overheard today at the gym. Two boomers.)
Man: Is your daughter still renting?
Woman: Don’t tell me… It gives me anxiety. Who is renting those days?
Man: I do not know. Every one I know owns. Why doesn’t she jump in?
Woman (looking at the far away horizon with empty eyes): She is waiting for things to change…
Man: What ?!?!?!
Woman: This is what she says….
Man: Do you really think things could change? This is Vancouver.
Woman: No…uhhghgh… maybe, who knows?
– jumpin in at VCI 4 may 9:26pm

RE-Tweet – “Conversation I had recently reminded me of my days living in Dublin pre-RE collapse there and the scary parallels with #VanRE now.”

“Conversation I had recently reminded me of my days living in Dublin pre-RE collapse there and the scary parallels with #VanRE now.”
– tweet, Eric Lam, @elam101, Vancouver, 22 Apr 2012
Eric describes himself as “Parent, foodie, interested in markets, real estate, design and lots of other stuff, fixed income analyst by day.”

Spot The Speculator #78 – “One couple recently spent $900,000 on an East Van house and also own a downtown condo.”

“Recently we hosted a meal at our home with 3 young couples present. The topic of real estate came up. One couple recently spent $900,000 on an East Van house. When someone referred to my bearish outlook the male owner of that home, who also owns a downtown condo, brought up a couple of classic arguments:
• even if this is a peak, real estate is still a good investment in the long term, just like the stock market.
• Vancouver is different.”
– b5baxter at vancouvercondo.info 30 Mar 2012 2:36pm, who also adds analysis.
—-

Real estate is only sometimes “a good investment in the long term”.
Buying (or holding) when it is historically overvalued is a certain recipe for underperformance.
Holding more than your personal residence, with leverage, through a downswing, is a recipe for crippling punishment.
– vreaa

Vancouver 2030, Bull Case – “Stop throwing rent down the toilet and filling your landlords shorts with money bags, stop dumping money into risky and volatile stocks or savings account yield negative interest rates.. Be an OWNER and not a renter and GET RICH”

“This Macleans article is all about predictions.. no difference than economist, fortune tellers, mayans
The fact is that Toronto and Vancouver are the most attractive cities in the world and foreigners are trying to bust down barriers to enter these two cities to lay their roots. Here’s why the RE boom will continue:
– Lots of immigration coming in; esp professionals and high net worth families
– Best banking system and excellent government policies in place
– Very competitive in the resources/oil/financial sectors
– Consistently ranked by all financial publications as the best cities to live in the world
– Best educational system in the world
– Diverse, multi-cultural, polite population that are always welcome to foreigners
– Interest rates will stay low for a very long time (think Japan)
– The Conservatives show us that time and time again that they are pro-RE and will not let prices fall at all
Here are the prices for Toronto and Vancouver in 2030:
Toronto
Vancouver -> [see chart above]
Stop throwing rent down the rent [sic] and filling your landlords shorts with money bags, stop dumping money into risky and volatile stocks or savings account yield negative interest rates..
Be an OWNER and not a renter and GET RICH”
– BobJJones commenting at Macleans 28 Feb 2012

Saved here for the (somewhat broken) record.
“Yes, Virginia, there were people who were still this bullish on Vancouver RE, circa 2012.”
– vreaa

Vancouver – “Where my friends/mom/society/tourists think I live; Where I actually live.”

– found on Facebook by Makaya, forwarded to VREAA 20 Feb 2012.
[Thanks. -ed.]

Vancouver Realtor Pam Allen – “Since October, it was like someone turned off the tap. It became absolutely dead.”

Emily Yao admits to disappointment when her bid on a three-bedroom condominium in this desirable West Coast city was turned down last October. But a month later the systems programmer, who moved to Vancouver from mainland China six years ago, snapped up the still-unsold condominium on Vancouver’s East Side for $550,000, a difference of $9,000 below the original price tag.
It’s a pattern being replicated across the Pacific port city, in a dramatic turnaround from the bidding wars, show day stampedes, and above-market offers that long dominated North America’s costliest property market.
“Since October, it was like someone turned off the tap. It became absolutely dead,” said long-time realtor Pam Allen.
What’s taking the sizzle out of Vancouver prices and putting the brakes on sales are expectations that rock-bottom Canadian mortgage rates will stay low, so there is no rush to buy.
At the same time, Chinese investors, who have long helped to underpin the city’s red-hot market, are holding back because property market curbs back home means they have less cash available.
But with immigrants still streaming in from China and elsewhere, and the city frequently rated one of the most livable on the planet, most experts see prices fizzling rather than imploding with a bang.
…
No official figures are available on the percentage of Vancouver home sales to investors from mainland China or Chinese immigrants. But local realtor Tom Gradecak says that in popular areas such as the West Side, a leafy block of land flanking the university, it could be 50 per cent, rising to up to 75 per cent for homes selling for more than $3 million.
“Chinese money is a big factor … today as it was in the period after 1986,” said David Ley, author of the book “Millionaire Migrants”, which examines the impact immigrants had on Vancouver’s housing market.
“House prices in greater Vancouver bear no relationship to the local labor market. Prices are kept high by offshore capital arriving from immigrants and from foreign investors.”
…
Despite a mid-recession dip around 2008, Canada’s housing market has remained resilient for the past decade, and the Vancouver market has outperformed the rest of the country for seven of the last 10 years.
Vancouver price rises peaked at a stunning 19.8 per cent in 2006, dipped in 2009, and came roaring back with double-digit growth in both 2010 and 2011.
A house bought for $500,000 in 2001 would have fetched about $1.2 million a decade later, based on average price changes.
But the latest month-to-month figures show Vancouver prices fell in five of seven months from last June to December, including drops of more than 5 per cent in November and December.
…
There is always talk of bubbles, of course, but experts don’t see the Vancouver market crashing as the U.S. one did.
…
“I would anticipate Vancouver house prices falling further. We don’t know by how much,” said Sal Guatieri, senior economist at Bank of Montreal, co-author of a report entitled “Will Canada’s Housing Boom Forge On, Fizzle Out, or Flame Out?”.
“But that is one area that appears ripe for some sort of correction, though we are not anticipating a severe correction.
…
Realtor Tom Gradecak, who specializes in property in Vancouver’s pricey West Side, says it is too early to see any impact here, though he expects there will be some domino effect. In the business for the past 20 years, he remains sanguine about Vancouver’s real estate prospects.
“We will see ups and downs, but I think five years from now the prices will be higher than they are today,” he said.
– from ‘Vancouver home prices to fizzle, not pop’, Reuters/Vancouver Sun, 9 Feb 2012

“Expert, texpert choking smokers
Don’t you think the joker laughs at you?”
– Lennon/McCartney

RE Bubble Cone of Silence? – “I recently spoke to a guy fresh out of MBA school and planning to get into the housing market. He had said I was the first to voice any concerns about the RE market to him. He was of the opinion that RE only goes up.”

“I recently spoke to a guy who was thinking to get into the housing market (new high paying job, fresh out of MBA school, wife and new kid) and he had said I was the first one to voice any concerns [about the RE market] to him. He was of the opinion that real estate only goes up, that far flung areas will soon be centralized with the endless expansion of burbs, that it is a great time to buy with low rates and that the high prices were secondary. Upon further discussion he acknowledged that debt levels were high for too many, that a rise in rates will lower affordability and could very well eat away his equity, and that if the likelihood of prices rising over the next 5 years is low then it may be best to wait, plus it was cheaper to rent than own.”
– Rob at VREAA 2 Feb 2012 8:33am

Gee, a guy who has an MBA and doesn’t read the newspapers, or the web, or Maclean’s, or The Economist.
Are there still market participants out there who haven’t heard anything about the possibility of Vancouver RE being severely overvalued?
RE Bubble Cone of Silence?
– vreaa

“D-Day” – “The NEW MEME (the realistic one!) is beginning to spread.”

“People I work with here in Vancouver’s eastern suburbs (Tri-Cities) are starting to “talk”. People are actually beginning to realize that it is NOT different here on the West Coast.
There are some who are still clinging to the fiction, however, but, the NEW MEME (the realistic one!) is beginning to spread.
It feels like D-Day for those who have waited patiently.”
– Boombust at greaterfool.ca 1 Feb 2012 11:30pm

New meme; D-Day.
Both work as good descriptors for this point in the cycle.
– vreaa

“I left Vancouver in 2005. When I go back to visit, the conversation usually turns to RE with snooty relatives boasting about their $1M houses.”

“I left Vancouver in 2005. Sure glad I did. When I go back to visit family, the conversation usually turns to RE with snooty relatives boasting about their one million dollar houses. I can’t wait for the housing bubble to pop and humble these folks. It will be a tough fall to reality for Vancouver.”
– Uh Oh Canada at greaterfool.ca 6 Jan 2012 10:37pm

Denying The Obvious Bubble – Close Your Eyes; Think Happy Thoughts; Don’t Use Nasty Words; Bad Things Will Go Away

“A new year means new resolutions, and we should start fresh when talking about Vancouver real estate.”
“Happy 2012! In keeping with the spirit of the brand new year, I say we resolve to look at our dynamic real estate market in a fresh way. Let’s proverbially “sweep out the old” and make room in our news for market stories from a fresh perspective.
First, we should agree not to discuss things that don’t exist. There are three things I don’t want to hear about anymore in the real estate world for 2012, so let’s clear the air and get off on the right foot here.”
The Bubble
“What bubble? If I never have to hear one word again this year, it would be “bubble.” One of the most compelling aspects of the bubble is there is no way to predict it.
In each historic case of bubble markets (characterized by rapid price increases and a sudden pricing collapse), it is the unpredictability in forecasting that is the common thread. While economists and pundits have claimed affordability indices are the true measurement of anticipating a housing bubble, there is no historical data to support it.
All of the market bubbles in Japan, the U.S. and Australia, had their own underlying economic and political drivers. Our country’s lending policies are conservative and are coupled with record-low interest rates.  B.C. is known for exceptional regional livability, low unemployment and excellence in education.
Let’s face it – if there is a bubble correction, most single-family homeowners won’t be affected. In any market, few “win” on both ends of the deal. Buy low/sell low and buy high/sell high would be the norm for most. Let’s agree to disagree until we can discuss it in hindsight.”
– excerpted from ‘Let’s Change our Vancouver Real Estate Vocabulary’, by realtor Leah Bach, BC Business magazine, 6 Jan 2012 [The other two things to agree to not mention are ‘Real Estate Fees’ and ‘Foreign Investment’.]
—

Adults know that this is complete hogwash. Of course you can identify bubbles when they exist; they exist when asset prices run up far beyond fundamental value as determined by future income stream, fueled by speculative buyers using cheap financing to chase rising prices in a momentum fashion. As happened with tech stocks in the 90’s, US & many other RE markets housing through the ‘naughts’, and as has so very obviously happened with Vancouver RE 2003-present. These are all classic asset bubbles.
Another reliable identifying factor seems to be that there will always be self-interested commentators, in the middle of the bubble, claiming that bubbles can’t be identified: Greenspan,  Bernanke, Leareah; Vancouver/Canadian RE bubble ignorer/apologists (Bach, Wiebe, Podmore, Sommerville, Flaherty, Muir, Yu, Guateri, Geller, Bryan, Pastrick, Dupuis, Campbell (Don), Goldberg, Marchildon, Lovett-Reid, Klump, Regan-Pollock, Dunning, Dugan, Jenkins, Ash, Kinch, Good, etc, etc).
So, the routine seems to be to stick your fingers in your ears, ignore the data, dismiss the “naysayers”, and then, after the implosion, to pontificate as to how impossible it was to see all this coming. If your eight year old kid behaved like this, you’d call him on it.
Bubbles can be identified before they implode. Shiller, Baker, Prechter, Shiff, innumerable online bloggers, all saw the US RE bubble for what it was. Keene has written extensively about the Australian RE bubble. Rosenberg, Baker, Shiller, Krugman, Shedlock, Coxe, Jarislowsky, ‘The Economist’, Rabidoux, Turner, innumerable bloggers have all clearly stated that they see our national Canadian RE bubble, and many have pointed out that Vancouver is an extreme example of such a speculative mania.
If it walks, talks, smells, looks, behaves, and, heck, has the complete genetic structure of a duck, call it what it is – it’s a duck.
Those who argue that this is not a speculative mania, particularly if they do so from a self-serving position of influence, should be taken to task on their opinion.
– vreaa

Cam Good – “If You Can’t Beat ’em… Beat Somebody Else.”

‘Are Canadians the New Chinese?’
“So the Christmas season is upon us. It’s time to build a fire in the fireplace, brew up some mulled wine and spend time with the family. A good conversation starter at this time of year might be last night’s Christmas party or upcoming vacation plans.
But if you’ve had enough sugar and spice and everything nice and feel like ruffling some turkey feathers then try dropping the following comment into conversation:
“I welcome Chinese investment in Vancouver real estate”
Mouths will fall open, the music will stop with an exaggerated record scratch and the fire in the fireplace will be mysteriously snuffed out.
These words are guaranteed to start a raucous debate, especially if the booze is flowing. The soaring price of Vancouver real estate is the topic on everyone’s mind. Unfortunately speculation is plentiful, with little concrete fact—just open a newspaper or scroll the Vancouver Real Estate Anecdote Archive for the latest horror stories and heated opinions.
Is Vancouver’s housing bubble about to burst? Is there even a bubble? If so, what’s behind it? Etc. It has our heads spinning and our wallets quivering in fear.
Some feel that the Chinese are to blame for the hefty price tags on Vancouver homes. Recent economic prosperity in China has led to the emergence of a huge class of ‘new rich’ and they are buying up Canadian real estate, sight unseen, to the chagrin of many.
And yet, Canadians are doing the exact same thing in the States, in places like Las Vegas, Florida and Arizona. The economic fallout from the sub-prime mortgage crisis combined with the overall tightening of US credit markets has led to a dramatic drop in real estate prices. The bottom line: American real estate is an accessible and potentially lucrative investment and many Canadians are already taking advantage of the opportunity.
If a house is for sale, whether it be in Arizona or Vancouver, and somebody has the money to buy it, should it matter where they come from?”
– Cam Good, local real estate salesman, post at The Key marketing group website, 16 Dec 2011 [hat-tip Gord]

We’re touched by the VREAA mention. But “horror stories”? We haven’t even started running the ‘horror stories’ yet; they, unfortunately, come later.
And they will be that much more horrific given the heights from which prices have to fall. And just one factor that promoted those price heights was the shameless pumping of real estate by local RE hucksters. And self-anointed poster-boy for local RE promoters would be….?
Anyway, that sub-plot aside, let’s look at the current advice Cam is giving:
If you’re Chinese, invest in Vancouver; if you’re a Vancouverite, invest in… Arizona.
Why the inconsistency? With the love for Vancouver, why bother with Arizona?
Is Vancouver in a bubble or is it not? Cam scorns those who ask, but he doesn’t answer the question.
The rest of us all know the answer.
– vreaa

Sentiment & Prediction – “This city is for those with equity. Your governments have abandoned you. Everyone wants the RE gravy train to continue and measures will, and have been taken, to keep the party going. Nobody cares about a small, silent minority of prudent renters. You are invisible.”

“Ah…another year and another year of failed predictions to come for the bears…
I always love January…its the start of the delusional bear “wishful thinking” season…
January rolls around, and out comes the threat to prices from a blossoming inventory; soon, after no price declines, we move into Spring, with the criticism of stupid buyers as bears watch strong sales and inching up prices; then comes summer, with declining inventory, and wails of dirty asian money and cheap money; then comes fall with increasing inventory, but no price declines despite “poor” sales; then comes the next year…
Ah, repeat….for the 7th year of failed predictions for some of you (circa 2005)
You have one life to live bears…
Maybe its time to take a page out of “formervancouverresident”‘s play book, and move on…
This city is for those with equity after not “sitting on the sidelines” for almost a decade and those rich Asians that have no problem laundering their ill-gotten gains here.
Face it, the federal government has abandoned you; your provincial government has abandoned you; and your local government has abandoned you. Everyone wants the RE gravy train to continue and measures will, and have been taken, to keep the party going. Nobody cares about a small, silent minority of prudent renters… you are invisible.
Your family and friends all question your intelligence for sitting on the sidelines, and quietly whisper “I wish they would just do the right thing, and settle down, and buy a place”…
Time to move on boys and girls…”
– Move On at vancouvercondo.info 1 Jan 2012 11:35am

Vancouver RE has indeed been in a speculative mania since 2005, perhaps it started as early as 2002-2003, and ‘Move On’ is correct to note that a small group of bears have been pointing this out since then. Remarkable, eh? The audacity!… the tenacity! But that is what happens in bubbles. Bears look sillier and sillier until they suddenly, spectacularly, look right. (Then everybody goes back to ignoring the contrarians, again…).
But ‘Move On’ is wrong about other things:
Just because a bubble expands for a long time doesn’t mean it transforms into a stable entity. On the contrary, it becomes more and more likely to implode, and the implications of the implosion get more dire the bigger it gets.
Also, there are no powerful ‘hands’ supporting the speculative mania. It has been the product of self-perpetuating market forces and myths; the results are far larger than any entities could hope to ‘orchestrate’. Conversely, when the bubble begins to implode, governments will be powerless in attempts to keep it inflated. Market forces are far more powerful than any available ‘measures’.
‘Move On’ will be proven wrong; until then, ‘Move On’ appears to the superficial observer to be ‘right’. This is always the way it is with these market phenomena.
– vreaa

RE Features In Story And Discussion Of Vancouver Execution Style Slaying – “I’m in business for myself. I know how hard it is to get ahead in this city doing it the legit way.”

“Vancouver police are poring over clues to try to figure out who wanted to execute a 38-year-old mother of four less than two weeks before Christmas.
Thuy Yen “Jenny” Vu was shot several times as she sat in her BMW SUV just after 3 p.m. Wednesday with her three-year-old son in the back seat.
Const. Lindsey Houghton said neither Vu, nor her husband, Stephen Michaelson, are known to police. Nor is Michaelson a suspect in the deadly shooting in front of the house the family shared in the 6400-block of Bruce Street.
“At this point detectives have told me it is far too early to speculate on whether this has any connections to gangs,” Houghton said.
“It is far too early to figure out the motive for this….detectives still have far more questions than they do answers.”
Vu and Michaelson bought the house in November 2010 for $1.11 million, property records show.
Vu is listed as a hair stylist and Michaelson as a businessman on the land title documents.
Houghton could not say what kind of business Michaelson is involved in.
Also in November 2010, Michaelson purchased an acreage in Rossland, B.C. for $468,000.”
– from ‘Husband not a suspect in BMW SUV shooting: Vancouver police’, by Kim Boland, Vancouver Sun, 16 Dec 2011

“What is the name of the business? I have been trying to find that out.”
– Kim Boland, the Vancouver Sun reporter, at her blog 19 Dec 2011 12:49am

“I have no doubt there must be some link to organized crime. I have heard she had involvement in grow-ops. But she does not have any charges.”
– Kim Boland at her blog 18 Dec 2011 11:31pm

—-
“Wow – Million dollar home, acreage in Rossland and an X5 among probably a lot more – shouldn’t be hard to figure this one out for the police. Likely a message for dad to pay up!”
– joe at Kim Boland’s blog, 15 Dec 2011 10:15pm

“Is there anything except for million dollar homes in Vancouver? And Beemers rule the lease market cuz Mercedes won’t play.”
– putmeincoach at Kim Boland’s blog, 15 Dec 2011 11:08pm

“Good luck finding a house in Vancouver that ISN’T a million dollars.. dumb comment.”
– Anonymous at Kim Boland’s blog, 16 Dec 2011 12:07pm

“Actually, it is not a dumb comment. Sure, the majority of homes in Vancouver are a Million+ but there ARE cheaper, less expensive places to live. The obvious point that the poster was making is that these are people of means, OR people who lived as though they were. Who knows what the truth is at this point. Hopefully the investigation is going well. Obviously there is a lot of information that the police find out that they don’t release to the public. So for now it’s just theories and speculation, AND common sense. I’m big on that.The theory (at this point) that there were loan sharks involved seems credible. More credible than the belief that all the people involved, including the victim, are completely innocent. Only one I know for sure is innocent is that little boy.”
– Common Sense at Kim Boland’s blog, 18 Dec 2011 11:39pm
—-

“No one deserves to die like that. [Posters] are right [to point that out]. But people are also trying to figure out why this terrible slaying happened. Police say it was targeted. So it is understandable why people speculate.”
– Kim Boland at her blog, 18 Dec 2011 11:40pm

“I don’t know Jenny or her husband so I won’t pretend to know all the facts. That said I won’t stick my head in the sand and pretend like this story sounds innocent.
Jenny apparently was a ‘stay at home’ mom for the past years, spending her time at yoga; and her husband is a ‘businessman’. She apparently owned a home in Burnaby, and they bought $1.5 million dollars worth of real estate in one month. Credit is fairly cheap, but you would have to be earning quite the income to make those moves.
Considering they were only on one income with 4 kids, the story tends to sound all too familiar. Pretty you’d girl; loves the good life. Enjoys the ‘finer’ things in life; is attracted to the bad boy who can provide her that fast luxurious lifestyle. Young meat head is attracted to the hot toys and women he attracts with money. After not too long he’s in too deep or addicted to the lifestyle. Some people in this city rack up huge debt trying to keep up with the ‘Bacon’s’. Others say f’k the 9-5 and light up a grow show or two because working a crappy job and or being broke in this city is harsh and gets you no love.
I’m in business for myself I know how hard it is to get ahead in this city doing it the legit way. I know how hard it is to get approved for a mortgage these days after they tightened the lending rules.
Am I jealous? To be honest sure sometimes when you see these people buying all that expensive stuff, traveling, partying, seemingly with no cares in the world, I’m only human. I’m not jealous of the fact that these things usually catch up to people. I’m not jealous of constantly having to look over your shoulder. I’m not jealous of the pain her family must endure for the rest of their lives. I hope the kids get good care, and can adjust to the reality of life with no mom. No kid deserves that.”
– YVRGOODTIMES at Kim Boland’s blog, 20 Dec 2011 2:11am
——–

Even though we don’t yet know all the facts behind this ghastly event, the discussion it has already induced is noteworthy. These thoughts about the discussion as much as the incident itself:

“I’m in business for myself. I know how hard it is to get ahead in this city doing it the legit way.”
There will always be those who chase the quick buck.
But in Vancouver today, things are arguably more extreme than during typical times: almost a decade of too-easy money has subverted our society’s principles and beliefs regarding honest work and honest pay. A frontier mentality appears to prevail.
Honest pay is too meagre; quick profits from whatever source are too attractive. Citizens who work hard for conventional wages are considered suckers. People are drawn to fast-and-loose endeavours, be they legal or not. Property flipping; Grow ops; Loan sharking; Gambling; Smuggling; Stock trading…. anything where the potential rewards are disproportionally large compared to the labour involved.
Our economy has been  juiced by massive amounts of debt, with abnormally large amounts of  money released into the economy through the speculative mania in housing. This has caused alterations in behaviour that are deleterious for the long term health of our society.
The misallocation of resources is the resultant central crime of the bubble; we should all rail against the speculative mania for that reason.
– vreaa

It’s The Locals! – “All my friends and everyone I work with has bought a house. None of them are Chinese.”

“All my friends and everyone I work with has bought a house. None of them are Chinese. You people have to get out more.”
– WhatProblem at vancouvercondo.info 12 Dec 2011 3:45pm

Tsur Somerville – “My friend went up to Mayor Robertson and said, ‘Look, you can’t have the city more affordable AND the most wonderful, greatest place to live in at the same time. Those things are fundamentally incompatible.’ “

“And my friend went up to [Mayor] Robertson and said, ‘Look, you can’t have the city more affordable AND the most wonderful, greatest place to live in at the same time. Those things are fundamentally incompatible. All those things you’re going to do to make it the most wonderful, greatest, hippest place to be are all going to make it more expensive.'” …
“You want to promote Vancouver as a world-class city, and then you say to the world, don’t come here? It seems a little contradictory, don’t you think?”
– Tsur Somerville, UBC’s Sauder School of Business, as quoted in ‘We all want affordable housing – somewhere else’, Pete McMartin, Vancouver Sun 8 Dec 2011.

Further excerpts from the same article:

“Affordable housing is hot these days. Everyone wants it: no one knows how to get it. Robertson promised a task force on it. Some want a restriction on foreign ownership. They put the blame for rising prices at the well-shod feet of wealthy immigrants.
Statistical evidence propelling that argument is slim. Because transactions are often done through intermediaries, it’s hard to track foreign ownership sales. But the anecdotal evidence is eye-popping, and has a lot of people convinced foreign buyers are the main levers pushing up of house prices.
Somerville isn’t so sure. They may be a factor on Vancouver’s west side, he’d allow, but not in Surrey or Coquitlam.
…
Affordability means different things to different people.
One, if you own a house, you find yourself on the other side of the coin. You want house prices to rise. At the very least, you don’t want them to fall.
Two, it depends on who you want affordable housing for.
“To me,” Somerville said, “for someone wanting to live on the West Side but ending up in Burnaby because they can’t afford to buy on the West Side doesn’t strike me as a problem. But for a single mom who can’t find a decent place to raise her children, that’s a problem.”
—

Overall a pretty good piece. It brings some discussion of the contradictions inherent to the ‘affordability’ discussion into the mainstream press.
Somerville makes a good point with the promote/afford paradox comments, and we also agree with his comment regarding foreign buyers only affecting a relatively small sector of the market directly (and, we would add, the whole market indirectly).
We’d disagree with the Westside/Burnaby comment. Yes, we agree that the single mom in need of a decent place is a pressing problem, but so is the displaced professional. We believe that inflation of the market has had deleterious, albeit different, social effects at all price levels. For instance, there are many stories of overinflation of Westside (or Eastside) prices having caused surgeons and professors and business executives to avoid Vancouver: professionals who would have happily settled in Vancouver in moderately expensive homes have returned to Alberta, or the US; or left for Halifax or Ottawa; or not come here in the first place. You have to compare what they get here with what they get elsewhere: It’s not enough to say “Why not move to Burnaby, or White Rock ? – you can afford that”.
Finally, good for Pete McMartin to note that “if you own a house, you find yourself on the other side of the coin”. For those who would like to see policy changes that genuinely make housing broadly more ‘affordable’, this is a massive challenge: the vested interest of all Vancouver homeowners in ongoing excessively high home prices.
– vreaa

‘The Province’ Poll – “Should the City of Vancouver put restrictions on foreign ownership of city real estate?” – 81% Respond “Yes”

– from The Province, 14 Nov 2011

Peddling Influence In Municipal Government – Civic Politicians and Vancouver’s RE Industry

In March 2011 we calculated that Christy Clark received more than 50% of her campaign funds for the race for the leadership of the BC Liberal Party from RE-related industry.

Now, at the Municipal level:

“In this case, the money speaks a lot. If you look across the range of contributions and you try to group them broadly, the property development and construction business is the largest collective group of contributors.” – Patrick Smith, political science professor, SFU
– from ‘Running Against Developers in Condolandia’, Ben Christopher, The Tyee, 9 Nov 2011
[hat-tip ‘Jeff Murdock’]

“It’s clear that Vision Vancouver and NPA received a lot of funding from development companies during the last election.” – Nicole Benson, Candidate, Neighbourhoods for a Sustainable Vancouver (NSV)
– The Tyee, 9 Nov 2011

“Both main parties are completely beholden to real estate developers, more so than any time in the city’s history. This isn’t good and I have to wonder just how much monied backslapping and handshaking is going on. This is how the BC Liberal Party imploded, by allowing their donors and top, most accommodative friends unfettered access to the keys of the province: No door was off-limits, no industry remained unmolested–friends and insiders ravished them all.
Well, look for Vision’s attempts to destroy the viaducts to be one such example. The developers with the most to gain are Vision’s biggest corporate cheque writers…that’s if you don’t count the American money of unknown origin, pouring in from the radical, left-wing Tides Foundation.
And this isn’t an issue for the NPA to raise? Of course it is, but they can’t, seeing as though the same monsters, who buy favour, are writing them cheques as well.”
– Alex Tsakumis, on his blog ‘Rebel With a Clause’, 7 Nov 2011
[hat-tip ‘Nemesis’]

“Vision’s executive director, Ian Baillie, insists that there is no quid pro quo relationship between campaign donors to his party and the candidates they support.”
– The Tyee, 9 Nov 2011
[Don’t you love it when these guys say this with a straight face?
Why would companies possibly give money to politicians if they didn’t want to curry favour?
What else could possibly be on their minds?
– vreaa]

“At the time he absolutely believed it 100%, and so did I. How did we get sucked in? I figured it out: It’s possible to have your ego get so pumped up that it completely destroys all logic and common sense.”

“Little vignette. During the dotcom bubble when our company stock was flying while we rushed crap out the door just to be able to book the revenue, I overheard from my cube one of the sales guys ask: “How is it possible customers go along with this and we still get paid?” to which, our GM very loudly proclaimed: “We’ve worked very hard and earned it!”. This will stick with me forever. The reason being at the time he absolutely believed it 100% … and so did I. Our GM was a very sharp guy. So how did he get sucked in? How did I get sucked in? Took me a bit, but I figured it out: It’s possible to have your ego get so pumped up that it completely destroys all logic and common sense. So, let me ask the bulls, AFTER all that you can see laid out before you (San Diego, Phoenix, Miami, Las Vegas, Shanghai, HK, Spain, Ireland, Greece, blah-blah-blah), how can you think this will end differently for you? Have your heads really become that enormous? (PS. Homer wrote a nice little volume about this.)”
– chubster at VREAA 6 Nov 2011 2:44pm

Spot on regarding “can’t happen to me” psychology.
Amazing, isn’t it?
Completely relevant to why so many Vancouver owners/buyers see the dots but don’t connect them.
– vreaa

“I got on the “property ladder” 14 years ago using my RRSP savings to buy a 500 sq.ft. condo, then I moved up to a 2 bedroom, then a townhouse, then a 1/2 duplex, and now am the proud owner of my dream 4 bedroom westside home for my family.”

“You lazy spendthrifts have no one to blame but yourselves…I got on the “property ladder” 14 years ago using my RRSP savings to buy a 500 sq.ft. condo, then I moved up to a 2 bedroom, then a townhouse, then a 1/2 duplex, and now am the proud owner of my dream 4 bedroom westside home for my family. Hard work and saving money, keeping my head down and saving and investing like previous generations. It worked then, it still works now. It is doable. Great condos are available in Gastown right now starting at $200k, not that much different than the $165,000 I paid for my first place Downtown in 1997.
But everybody wants the easy life, no one wants to work for it!”
– r_dub71 at Vancouver Sun, 25 Oct 2011, 11:49am

We believe 98.37% of the anecdotes we read.
Granted, we err on the side of gullibility.
We are more the librarian, less the prosecutor.
But, even we found this story too ‘cute’.
Hard working property ladder climber or hard working Gastown condo salesman?
(“You’re not buying a small box for $200K, you’re taking your first step to securing your dream home!”)
OK, let’s assume it’s all true: We’d really like to see the math on the sales-prices and mortgage debt for each of the 5 deals, and to see the current networth:RE ratio.
Anybody care to come up with some hypothetical numbers for climbing the ladder the way he/she claims?
Has that worked through the mania?
Don’t the higher rungs get further away each step? (Yes, they do.)
Sure, you build (paper) equity, but you fold it into a higher buying price, and take on more mortgage debt, each step.
– vreaa

Carney ‘Not Complacent’ About Level Of Household Debt or Housing

“Bank of Canada Governor Mark Carney said, in testimony to the Senate Banking Committee, that he isn’t complacent about the level of household debt in Canada or the state of the country’s housing market.
The Bank of Canada has highlighted in its financial stability report the risks posed by record levels of household debt, and Carney said in a speech in Vancouver earlier this year that there are signs some local housing markets are moving away from fundamental values.”
– Bloomberg, 2 Nov 2011

Another oblique and lukewarm show of concern.
When the housing bubble implodes, BOC will say they ‘warned’ Canadians of the risks.
Well, Canadians are not listening. They continue to borrow as much as they can; two out of three new mortgages are at variable rate.
We know that the BOC can’t raise interest rates in the current environment, for fear of dangerously slowing the economy. But Mr Carney could use his considerable influence to lean on Mr Flaherty. If the government sincerely wants to do something about the over-borrowing, they should tighten mortgage lending. But they won’t do that, because there are too many interests vested in the continuing speculative mania in housing.
– vreaa

High Up On The Roof

“My brother, who has zero experience in construction, answered a craigslist ad for a roofer position at a large roofing company. They offered it to him after a brief interview, 15 bucks an hour. He started work and was ‘trained’ by a crack addicted employee. The crack head, actually asked to borrow money from him for supplies, which turned out to be a lie for drugs – he obliged and offered up $200 – which he never saw again. My brother confronted his boss after the crack head went awol for a week. The boss had the keys to his apartment (the crack head was staying at an apartment of his) and offered him to go in and take whatever he wanted ! My brother quit shortly after.
If this is the quality of the people who are in the industry now, I can only wonder the quality of the output… crazy.”
– Loon at VREAA 30 Oct 2011 8:46pm

“When I was younger I did roofing for an outfit in Alberta and they had strict standards:
– sneak off to a local pub at lunch for a quick beer if you’re going to drink on the job. Or a one beer limit on the roof, but pound it so the customer doesn’t see
– smoke weed in the company truck but never ever on the roof. That would be unprofessional
– if it goes up nose I don’t want to know about it, but you’d better share
– if you’re working on the road don’t bring hookers back to the motel room you’re sharing with your fellow roofer. That’s what parking lots are for.
– be nice to the new guy. He just got out of prison, and oh by the way – can he stay with you for a while until he gets on his feet?
– all fights are to be done on the ground away from the kettle. And don’t throw hot tar at your enemy/co-worker no matter how much you want to kill him
Good times!”
– nobody you know at VREAA 30 Oct 2011 9:29pm

Concerned citizens hear these stories all the time, but they’ve gotta be exaggerations, right?
– vreaa

“Lately, I am sensing a shift in opinion among friends and family where more and more are complaining about the high prices of RE and whether it’s a good thing or not for the city and families.”

“Lately, I am sensing a shift in opinion among friends and family where more and more are complaining about the high prices of RE and whether it’s a good thing or not for the city and families, especially among the Xers and Yers who are mostly being priced out completely. I think the recent stories on Global TV just reflect that change in sentiment.”
– ‘Troll’ at vancouvercondo.info 12 oct 2011 11:37am [as previously discussed, this ‘Troll’ isn’t actually much of a troll]

“I said he made money because he was part of an irrational rising market not because of house-flipping super-powers. They looked at me with shock, they expected the story to pump me up with real estate lust.”

“I met with friends that were going on and on about an uncle that kept buying and flipping houses last year.
They said, “He made 50k on that one, then bought that and flipped it for 80k, then bought that and flipped it for 70k,…”.
I said, “He would have been better off buying one property and doing one sale and increasing his holding period, he made money because he was part of an irrational rising market not because of house flipping super powers. I said transaction costs would have killed him.
They looked at me with shock, because they were expecting the story to pump me up with real estate lust.
Needless to say, they bought a place last year and are renovating it with the intention of flipping it. In addition, Their neighbour is elderly and they want to now convince him to sell his place to them. They said they want the neighbour to sell to them and then just rent it back to the elderly neighbour…. I hope stupidity is rewarded accordingly.”
– Anonymous at vancouvercondo.info October 16th, 2011 at 7:52 am