A Veterinarian’s Dilemma – “Living in a 300-square-foot closet, moving to northern B.C. or renting for life.”

“My veterinarian, owner of a successful west-side practice, emailed recently to say young professionals like him “are left with a choice between living in a 300-square-foot closet, moving to northern B.C. or renting for life.”
– from ‘Here in B.C., we’re richer than we think — on paper’, Barbara Yaffe, 24 Mar 2014

[Posts are, as you can see, very sporadic. No change in our outlook for Vanc RE market. -ed.]

“We are noticing our target type of housing in price decline, albeit slow, as our money increases in value, slowly as well but outpacing housing.”

“Here’s a true story. I’ll call it 20 REASONS THIS COOL SPRING MARKET SUCKS FOR BULLS–Or how I learned to stop worrying and love the bomb!

1. We sold at the last peak.

2. You know what happened after that…housing skyrocketed.

3. We missed that.

4. Our half-house is now worth 165K more than when we sold. Ouch!

5. It was in a neighbourhood we hated. We decided to move every 2 years to try out neighbourhoods before we bought again.

6.. We moved. First into a crazy-expensive dream apt (condo) for a year. Unbelievable view.

7. We wanted to treat ourselves. We did.

8. We loved it but the drug dealers started moving in.

9. So it was more than OK to move out.

10. Got another condo rental. It was unbelievably unique.

11. Patio was under review when we moved in.

12. Patio repair was estimated at 6K and 6 weeks.

13. Patio repair cost landlord 11K and took 8 months. Our rent was reduced. It was one of two patios so no biggie.

14. Landlord had just paid 6K for last year’s repair.

15. We moved out on 2nd year, windows were leaking. Est. repair for building 11K-17K each unit. Plus front walkways were put on hold by 3 years of repair. Majority owner in building refused all repairs. Lawyers might have been needed. We moved.

16. Now in City managed building in OV. Great apartment.

17. Remember #4 above? “Our half-house is now worth 165K more than when we sold. Ouch!” Well, our money is now worth 433K more than when we sold.

18. We now know: no condos for us. We will get a 1/4, 1/3 or 1/2 house on the westside.

19. We know the neighbourhoods we like.

20. We are noticing this type of housing in price decline, albeit slow, as our money increases in value, slowly as well but outpacing housing.”

– mac at VCI 24 May 2013 11:31am

Renter Buys In West Van – “For a few hundred more per month, you could own the place. Which is what I will be doing as my offer for a place down the street has been accepted. There is some value in staying in one place.”

“I am currently renting in West Van. It has been difficult to find decent, “affordable” rental accommodation on the North Shore. For a few hundred more per month, you could own the place. Which is what I will be doing as my offer for a place down the street has been accepted.
Went for 23% below the list price. Owner been in the place for 11 years, and over that time, the value of the property increased on average 5% a year. I negotiated hard, walked away twice, and eventually the seller caved, just like I knew he would.
I’ve been renting for 5 years now, ever since a health crisis with one of my young children moved me back here. I was the bear amongst all my peers who are all “owning”. I still think there will be a crash in the Lower Mainland – but I think it will be an uneven crash. Certain areas will crash worse than others. I don’t think the entry level house market in West Van will crash. I think it will take a 10-15% drop and then move sideways or at inflation for a generation.
There is some value in staying in one place.”
– chumpy le chump at VREAA, 2 Jun 2013 4:36pm

All the best with your purchase, chumpy.
Does the “few hundred more per month” include all expenses (and assume no downpayment?). Share the math if you care to.
Further:
That’s 70% increase over 11 years (5% p.a. compounded)? Is that representative of the price increases on similar properties?
As we’ve said before, we expect all property types to revert to long term means; we don’t expect any to somehow be exempt.
– vreaa

A Bed in the Bathroom, Why Not? [Let Us Count The Reasons…]

“Here is another great Vancouver rental listed on Craigslist [link no longer active]. A bed in the bathroom..”

“Rental information:
Newly finished 1 bedroom with own ensuite. Furnished.
Access to dining room, living room and kitchen on main floor.
$500/month includes utilities, washer and dryer, and wireless internet.
Close to transit and shops.
No smoking. No pets.
Perfect for international students and short term renters.”

– from ‘Vancouver rentals: A Bed in the Bathroom, Why Not?’, vancitybuzz.com, 28 May 2013 [hat-tip space889]

Outrageous!
The underlying message, of course, is that we are Tokyo.
Again, consider this idea in relation to Canada’s vast expanse of land.
The bubble continues to grossly distort our thinking.
– vreaa

“My husband and kids are pretty happy in our rental house within cycling distance of work that we could never have afforded otherwise. We’re doin’ pretty dang well, thank you, for median income earners in this expensive city.”

“My husband and kids are pretty happy in our rental house within cycling distance of work that we could never have afforded otherwise. My husband is especially happy with the nest egg we’ve put away, and some day, my kids will be happy with their RESPs. We’re doin’ pretty dang well, thank you, for median income earners in this expensive city.
I have been priced out forever, according to any sane financial management strategy, for pretty much the whole time I’ve had a down payment. When the choice became “house poverty for family of four in a purchased 2 bedroom in Port Moody” vs. “responsible savings and a family of four in rental house with yard in Vancouver”, I thought something smelled funny in real estate. Still stinks, and will continue to stink, until prices adjust.”
– Absinthe at VCI May 24th, 2013 at 9:06 am

Advice Regarding Renting In Vancouver, Please – “Unfortunately, the Vancouver rental stock is absolutely atrocious. It just seems like every landlord is looking for someone to pay 100% of their mortgage on a crappy place through rental income.”

“..reading this blog I’m glad to see there are many others like me who eschew real estate and prefer to rent. My wife and I are in that camp. We moved from TO to Vancouver about a year ago, so our perceptions of the Vancouver rental market are pretty uninformed. Currently, we are looking to upgrade our rental from a small 1-bedroom, downtown apartment to something larger (a detached or 2+den apartment >1,000 sf) and within good distance of rapid transit (or at least what qualifies as transit in the rainforest). Unfortunately, the Vancouver rental stock is absolutely atrocious (at least compared to what I was used to in Toronto). Just browsing Craigslist or Kijiji becomes depressing – a large number of “garden” (re: basement) suites, or just places in serious need of some TLC. It just seems like every landlord is looking for someone to pay 100% of their mortgage on a crappy place through rental income (so much for their faith in real estate appreciation, eh?). Another challenge for us is finding a place that will except our small dog – our own doing, but she’s part of our family. Love to hear how others are fairing in their rental hunt.
Where do you guys look to find good rentals in the city? Do you use an agent? Any blogs you can recommend for people like us to share our thoughts on the rental market?”
– rent_vancouver at VREAA 11 April 2013 11:01pm and on

Vancouver Secretary’s Urgency To Buy Condo At 7.7x Annual Pre-Tax Income – “I’m worried about keeping pace. I’m worried that no matter how long I keep saving, the prices will keep climbing and I’m never going to be able to catch up.”

[photo Rafal Gerszak, The Globe and Mail]

“Alice Soo is developing a case of spring fever for real estate.
In 2011, five years after graduating from university, she made a final payment to erase $25,000 in student loans. At the same time, she has been a disciplined saver, with $30,000 now socked away. Ms. Soo, a clinical secretary at Vancouver General Hospital, is eager to use it for a down payment on a condominium in the suburb of Burnaby, and soon.
Why the urgency? Condo prices in Greater Vancouver have slipped 3 per cent over the past year, but Ms. Soo believes the softness in the market won’t last. “I’m worried about keeping pace. I’m worried that no matter how long I keep saving, the prices will keep climbing and I’m never going to be able to catch up. That is my main concern.”
Such is the psychology of the first-time buyer in Vancouver, the country’s most expensive property market. Prices here have soared 24 per cent since the summer of 2009, according to the Teranet-National Bank house price index, and the price of a typical detached home is still about $900,000. But prices have cooled and sales activity is way down – there were nearly 30 per cent fewer transactions this February than a year earlier – so Ms. Soo’s concern about missing out may be unwarranted….
“For every first-time buyer, there’s an owner who`s looking to sell and trade up, and for every upgrade, there`s a retiree looking to cash out. The “trickle-up” effect can make the difference between hot and cold in the market.
This year, the big question is: Will the first-timers come back?”
For Ms. Soo, who is now renting the basement of her sister’s home, the first choice is to buy a Burnaby condo priced at roughly $300,000, preferably close to a SkyTrain rapid transit station. Given her modest annual pretax salary of $39,000, Ms. Soo is excited by the prospect of moving into her own place by the time she turns 30 this summer. But price remains the sticking point for buying a condo this spring. She and her agent, Eddy Shan of Homeland Realty, are finding that sellers aren’t budging much from their asking prices.”
– this anecdote from ‘Will nervous first-time buyers make this spring housing market bloom?’, Tara Perkins and Brent Jang, Globe and Mail, 9 Mar 2013 [hat-tip OH YAH]

We agree that this FTB’s “concern about missing out may be unwarranted”. She is still living in the not too distant past, and continues to suffer from the “buy now or be priced out forever” fever. It’d be interesting to know more about her knowledge of current market conditions, and to understand her sources of information.
The current market action is precisely what one would expect through a topping process: sales declining, prices sticky but beginning to give, buyers waiting and watching. Sales volumes always lead prices.
And there will always be some buyers, at any point in the descent, thinking they have “bought the dip”.
The most vulnerable owners in the coming downturn will be the over-leveraged, the latecomers, and the retirees with far too much RE for their life-stage. If Ms. Soo buys, she’d be both over-leveraged and a latecomer.
– vreaa
————————-

Some further excerpts of interest from the same article:

“Will McKitka, a real estate agent with Macdonald Realty, said the spotlight has turned on the slump in property sales in February, but prices haven’t collapsed. “People use the B-word, in terms of a housing bubble. Vancouver isn’t in one,” Mr. McKitka said. Monthly sales volumes are being crimped by stalemates over pricing, he noted.
Two of his clients watched negotiations fall apart last month, even though the asking and offering prices were tantalizingly close. “Not close enough,” he said. But Mr. McKitka insists that buying into the Vancouver area’s cooled-off housing market makes sense. Gone are the days of huge jumps in home values, but for those able to save for a down payment in 2013, it will be a better financial decision to own than rent, he argues.”
…
“It still seems that the much greater risk is that sales weaken further, not that they surprise to the high side,” BMO Nesbitt Burns economist Douglas Porter said in a research note this week.
Prices remain stubbornly high in most urban markets. Fitch, a ratings agency, said this week that prices nationally are about 20 per cent too high. Such headlines add to the fear among first-time buyers that, even if they can afford to get into the market, now might not be the time.”
…
“Large marketing campaigns and incentives on the part of mortgage lenders are likely to play a significant role in driving the market this spring. “People buy payments, they don’t buy house prices,” says Toronto-based mortgage planner Calum Ross. “There is a huge psychological impact of five-year mortgage rates dropping below three per cent.” Mr. Ross adds that he’s now seeing “massive” amounts of marketing by mortgage lenders.”
…
“Phil Soper, CEO of real estate agency Royal LePage, said the slowdown is a good thing, because the market was too hot, but he thinks that the changes that Mr. Flaherty made in July went too far. “It pushed things for young people, for first-time buyers, to a place it didn’t need to be,” he said.
Now, he says, the impact of the change has largely been felt. “Young people have had eight months to either save up a larger down payment or look farther afield for a home,” he says. “As long as the cost of mortgage financing remains very low, we’re going to attract financially stable young people, first-time buyers, into the housing market. The desire to own one’s home hasn’t changed one bit.”
…

Will McKitka’s comment added to the ‘What Bubble?’ sidebar collection of bubble denier quotes.
We agree with Doug Porter’s observation that “surprises” are more likely to be to the downside.
– vreaa

“There’s a townhouse up for rent in a new(ish) development near my place that is owned by a realtor. After several unsuccessful attempts to sell he gave up and is offering it for a long term lease.”

“There’s a townhouse for rent in a new(ish) development near my place that is owned by a realtor and after several unsuccessful attempts to sell he gave up and is offering it for a long term lease.
The place is fairly expensive to rent, but still a fraction of what it would cost to buy.
Now get this – when I inquired about it, the reply I got stated that “the owner will pay property taxes, but I would be responsible for maintenance and strata fees” at around $350 a month on top of the rent.
OMFG, I still cannot stop laughing…”
– vanpire at VCI 2 Mar 2013 2:05pm

The owner was unsuccessful in their attempt to sell.
This simply means that the owner has an overinflated idea of the value of the property.
Drop the price steadily until it hits a bid. That’s the market value.
And, yes, the statement regarding the addition of the strata fee is indeed laughable.
Trying to make a high rent sound lower. Unlikely to draw anything other than laughs.
– vreaa

“He had friends who wanted to sell, but who ‘couldn’t afford to sell’. They had withdrawn their properties from the market.”

“I was talking to a young professional who rents in Vancouver. He said he had friends who had purchased in the last few years and, given the soft market, he expressed genuine concern – fear even – for their financial well-being. More interesting, he talked of people he knew who owned RE in Vancouver, who wanted to sell, but who he said “couldn’t afford to sell”. Consequently, they had withdrawn their properties from the market. He seemed to think this made sense, and he didn’t see how the market could possibly drop by enough to put them at risk, or to force them to sell.”
– from ‘westsidefrank’, by e-mail to VREAA, 25 Feb 2013

See: ‘The Myth of the Discretionary Seller‘ sidebar.
– vreaa

“Rentals are being phased out in our condo building because they are just too hard to manage and they bring down the value of the units.”

“Rentals are being phased out in our condo building because they are just too hard to manage and they bring down the value of the units.”
– comment by Kensington, 27 Jan 2013 4:00pm below ‘2012 a record year for Vancouver rental housing’, CBC News 27 Jan 2013

It’s still all about ‘value’ (read: price growth), and not about ‘income’.
The changes contemplated by this strata usually occur in red-hot price growth phases.
During weakness, when prices are descending, the potential for rental income becomes more important in the calculation of fundamental value, and in making a property attractive to buyers (thus offering more support to prices).
This strata appears to be late to the party.
– vreaa

“These things are obvious when viewed from the outside.”

“Had a nice talk with a doctor department head tonight. He moved here from Chicago where he’s still paying the mortgage on an underwater property. He looks at the prices here and he can see that it doesn’t add up. He was wondering when the tipping point would come for Vancouver. In any case, he has no intention of buying here for now. These things are obvious when viewed from the outside.”
– N at VCI February 8th, 2013 at 12:18 am

When a group is trapped in the jaws of an asset bubble, the vast majority of participants don’t have the capacity to ‘view’ it ‘from the outside’.
With perspective, the speculative mania can be seen very clearly for what it is.
– vreaa

“Our landlords are booting us out. My wife has been onside until now, but with the threat of homelessness she’s wavering. I feel that buying now is akin to climbing out of the lifeboat and back onto the Titanic.”

“Our landlords are booting us out of the house we’ve been in for 5 years. (She’s divorcing him and booted him out, and we’re next down the eviction chain as he’s moving in when our lease expires in a few months.) So we’re desperately looking for rentals in the same neighbourhood (Cambie) due to schools and work. Or we’ll buy somewhere like North Van and uproot everyone but only once.
After being around these boards for 5+ years I feel that buying now is akin to climbing out of the lifeboat and back onto the Titanic. The wife has been onside until now, but with the threat of homelessness she’s wavering. So I’m trying to decide how big the potential downsides are. Pay $3k in rent for 1-2 years then buy (and deal with 2 moves) or bite the bullet and buy now and pay that much for the mortgage (until rates go up). The potential savings by renting and delaying a purchase is what I’m trying to estimate.”
– /dev/null at VCI 22 Jan 2013 11:21am

“Sorry to hear that. Here is my view. We (a family with 2 kids) are renting half-a-duplex in Burnaby for $2000/month for about 5 years. Good area, decent schools, commute is ok. The landlord is a nice person, but has (and always had) thoughts about splitting the place into two units and rent them for $1500+$800 (this trick worked for a while for the neighbour landlord, until last year when they have started having problems with finding good tenants for the downstairs unit). I am tracking the rental pool in the area pretty closely and found that a lot of 5bdr/SFH in the $2300-$2500/month range entered the market last year (starting late summer I would say, most of them accidental landlords). Places like ours are steady in the $1800-$2100 range for the last 5 years, and the influx of of those 2300-2500 homes definitely helps keep those prices from growing.
Last fall, I had a number of conversations with my landlords and gave them the full picture, mentioning that we would have no problem finding something decent in the very same area. Of course, we were perfect tenants all these years. Apparently, it worked out, everybody seems to be happy now.
Back to your situation. First, I think buying something just because “we have to move out of here anyways” is a plain bad idea. Do the math and then decide. Second, I personally wouldn’t mind renting for another few years in your situation, even if it comes at a bit higher price comparing to the deal you have now. Rental pool in our (yours and mine) sector is improving, it’s renter’s market.
Yes, I know moving is painful. I know your wife wants a nest (mine too). Yes, – peer/parent pressure, accidental landlord risks etc. But the risk of losing money by buying something is just way too high these days. My $0.02.”
– C.Junta at VCI 22 Jan 2013 12:51pm
—

Great analogy from /dev/null.
Whether you’re on the Titanic or in a lifeboat, the speculative mania is at the very least time-consuming, inconvenient, anxiety-provoking, and distracting.
– vreaa

“The 47-year-old public-sector employee says her biggest financial concern is not owning her own home. Yet living in Vancouver, with its absurd housing prices, she doesn’t necessarily want to.”

As the primary breadwinner in her family, Monica is facing a paradox. The 47-year-old public-sector employee says her biggest financial concern is not owning her own home. Yet living in Vancouver, with its absurd housing prices, she doesn’t necessarily want to.

“We’ve stayed away from real estate because to stay in Vancouver it would be out of our reach,” says Monica, who has a husband and an eight-year-old son. “I’m not crazy about a condo, and that’s about all we could likely afford, even in the suburbs. I don’t want to be house-poor.”

Given that she and her writer husband, Blake, 50, have deliberately chosen not to pursue property ownership, she feels they should be concentrating on setting money aside for their golden years. At that point, she’ll collect a pension of about $4,300 a month.

On top of the $1,850 they pay monthly to rent a house and $270 a month to lease a car, they put some money away regularly into their son’s registered education savings plan (RESP), which will total about $7,000 by the time he graduates from high school. To date, Monica has turned to her bank for financial advice, and her registered retirement savings plan (RRSP) consists of that institution’s balanced funds.

While Monica admits feeling somewhat discouraged about her financial future, she isn’t ready to give up on getting her house in order just yet.

“Since we don’t own our own place, I think we should be saving more money, but I feel like we’re always behind,” Monica says. “I’m reading a book by Gail Vaz-Oxlade called Never Too Late[Take Control of Your Retirement and Your Future] that talks about saving for retirement even if you’re starting in your 40s. I’m watching [Ms. Vaz-Oxlade’s TV series] Til Debt Do Us Part.

“I hate owing money,” she adds. “2013 will be the year of financial organization.”

Summary of finances:
Combined income of about $121,000.
$42,000 in Monica’s RRSP.
$10,000 in savings.
$5,000 in credit-line debt.
$7,000 in RESP, the value in 10 years, invested at a monthly rate of $40.

– from ‘Renters want a house. Is it a good investment?’, Gail Johnson, G&M, 28 Jan 2013
—

If all things remain equal, this couple are likely heading for hardships in retirement, where their income will be substantially lower than it is currently, and their savings are too low to materially impact retirement income.
It is interesting to surmise that, if they had purchased a home in Vancouver ten years ago, their bottom-line would probably look healthier, but for all the wrong reasons. Many couples with similar incomes but who own their homes have had their household balance sheets ‘bailed out’ by unnatural gains in RE prices. As a group we have become over-dependent on home values for our future financial health.
– vreaa

“A friend of mine had to ditch his Vancouver Kitsilano rental condo because every month he was dishing out expense after expense but his rental income didn’t come close to covering the expenses.”

“One can have problem tenants even in great areas in Vancouver based on my experience. However, unless you are paying almost entirely in cash, you will have a losing investment. A friend of mine had to ditch his Vancouver Kitsilano rental condo because every month he was dishing out expense after expense but his rent didn’t come close to covering the expenses (with a 20% down payment). My family has OK luck with Vancouver rental property but that’s only because they paid cash but even then some of their tenants have been problematic. Victoria has worked OK, too, but that’s because we bought years ago – again the cash flow just isn’t there if you were to buy today. I will say I have had excellent results over the last six years in Saskatchewan – specifically Regina. And I’m still buying there. Even today, you can still buy a SFH for $300,000 or so in a good part of town and get $1800 month rent plus utilities and get your pick of good quality tenants. And that’s without an in-law suite – you just buy a place in a good part of town, rent it to tenants with good jobs and not worry too much. You can get other homes at even better cap rates in not so nice parts of town but they will be high maintenance and definitely not suitable for the out of town landlord. With a vacancy rate of 0.8%, it is actually easier to get good quality tenants with stable jobs in Regina than in Downtown Vancouver, believe it or not.”
– westar99 at RE Talks, 15 Dec 2012 4:11pm

A Journalist’s Richmond Tales; And His Caution – “It could be argued that the operators of these bear sites are hoping to trigger a “bubble collapse” simply by writing about it all the time, and offering opinion biased in that direction, even supported by stats. To what end? Perhaps they are renters, and want to jump back in post-collapse, and then reap financial rewards when prices go up.”

“I’ve been watching carefully, and reading religiously, the postings on this website.
As a journalist for nearly two decades, I enjoy the perspectives shared, especially about the biased nature of certain opinions from within the media, real estate organizations, and members of the public, as well as those who run this site.
I’ll wade into that later, but first, some real facts from Richmond, B.C., where much of the real estate craziness has been centred.
First, a little background.
My family first bought a split level house in 2002. A modest, 1,500 square foot, three bedroom, 1.5 bath, on a lot that measured about 8,000 square feet.
We bought for $320,000, and within six months, the prices in the area “soared”—I use quotes, because at that time, we thought this was the definition of “soared—by more than $100,000.
At that point, we’d already maxed out what we could borrow from the banks, and we thanked our lucky stars we got in when we did.
But our house wasn’t worth renovating, so when a home in the neighbourhood with better bones was listed in 2007, we jumped in.
We sold our place in a bidding war for $30,000 above our asking price, and landed this other home, a dozen doors away, for about $550,000, slightly more than we sold our old place for.
By then, my wife was back at work, my kids were in elementary school, and we could afford the larger mortgage.
We then renovated it, planning to live there for the next 25 years.
But alas, then the real craziness began, which redefined “soar” for us.
We were approached by a developer offering seven figures. Our jaws hit the floor. But we’d just renovated, and were emotionally invested.
Then we slapped each other in the face, and agreed to sell it for roughly DOUBLE what we’d bought it for. This was in 2011.
Turns out, the buyer also bought at least one other home a few doors down, and was planning to raze the structures.
Having received the offer, we were worried about the market continuing the insanity, and didn’t want to be priced out, so we sought out another home not too far away. It was priced $300,000 less than what we were about to sell our home for.
The deal closing period was the normal three months, and it was the spring of 2011. This was when the first hint of the frailty of the market appeared.
The buyer backed out of the deal, citing that financing wasn’t approved. (We’re convinced it was an excuse; banks were handing our mortgages like flyers)
We were shocked, and the deal to buy the other home died too.
Although it didn’t appear that way at the time, we were actually lucky the deal died.
We decided to list the property, and in early 2012, we sold it for $100,000 less than the previous year’s deal, to another developer. But we were still well ahead despite the six figure drop.
Our notary public was shocked to see the price we got. Nobody was getting that kind of money anymore in 2012, she said, for a tear-down.
Instead of buying again, we decided to rent, and that’s where we are today, as prices continue to fall.
By how much? Well, don’t let the Greater Vancouver Real Estate Board’s averages mislead you.
The devil is in the details.
Those median selling prices truly can fool you into thinking prices are “staying about the same”.
That’s not true. We’ve seen asking prices commonly drop by more than $50,000 for one $950,000 house we looked at. That other house we’d bought—before the original deal died—wouldn’t fetch within $150,000 of what we’d bought it for, and the neighbourhood is relatively ugly and certainly less desirable.
We almost bought another house from that original deal, bout were eked out in a bidding war for the house that sold for $950,000. Today, similar houses in the neighbourhood are listed for $120,000 less.
There are people out there, still wishing for their $1,000,000 pay day. But that’s not going to happen anytime soon, based on my close observations.
I’m convinced, based on conversations with my realtor and others, that much of the hype was generated by offshore buyers seeking new homes, and local developers scooping up tear downs to meet this foreign demand.
Today, in my old stomping grounds, there are close to two dozen brand new megahomes listed for $1.8 million or more.
They’ve been lingering on the market for more than a year, and in one case, closer to two. Those prices aren’t budging, but those developers will surely start feeling the pinch, as money from offshore (mainly China/Hong Kong) has dried up.
One house directly beside ours was bought for $720,000, a crazy price, only for the prices to further soar to $950,000 for our neighbour, in the span of just three months in the fall of 2011. A new house was built in its place, sold for $1.78 million to the parents of my son’s classmate, and is now back on the market for $1.9 million. Wishful thinking, no doubt, for someone wishing to be on the outside again as prices fall.
In the McNair area, I’ve seen houses drop in asking price by more than $150,000. Now, sure, you could say the owners were simply listing too high. But we’re not talking talking about one or two homes. We’re seeing many homes drop in prices by six figures.
When those home prices drop enough to attract a buyer, that will bring down the median selling house price, but only if the market for multi-million dollar homes remains quiet as well. If demand for pricey homes rises, those other price-drops would be masked.
I believe that prices have been propped up for a long time by higher-priced homes selling, hiding the street-level changes I’m now seeing.
This month, I’ve seen some evidence of change.
One house in the South Arm area listed for $720,000, and sold within a month. It was a modest rancher, on a corner lot of above-average size.
Other slightly larger homes on smaller lots, including one directly across the street, still are asking for $910,000+.
The bottom line: whether it’s a matter of the “bubble bursting”, I’m no expert.
But when prices drop 20 per cent, that’s nothing to sneeze at.
Now, back to the issue of biased reporting, readers should keep this in mind.
Journalists aren’t paid to share their opinions unless they are writing a column. They simply report results of research, observations, and the opinions of others, essentially.
When I read that a real estate association thinks this will be a good year, I’m reminded of one of my university classes.
I believe the term/phenomenon is “self-fulfilling prophecy”.
Real estate assocations/boards are understandably directed by their membership, which is realtors.
To say the sky is falling might just trigger said sky to fall, at least in terms of prices.
This should be self evident to readers.
It’s like asking a used car salesman if he likes used cars, or if the price of a particular used car is fair. If he says the price is inflated, you’ll offer less, and he’ll get less commission, thereby shooting himself in the foot, and earning the scorn of his bosses.
The same could be said for financial analysts. Those with enough of a following/clout could trigger cold feet among deep-pocketed investors, resulting in a cascading-like crash if they indeed predict one.
And finally, the same could be said of the analysis done by the operators of this site.
I once interviewed the frequently-quoted-on-this-website real estate expert from UBC, who referred to the Vancouver-based blogsites that have been predicting a crash for many years. (He claims there is no bubble, and therefore it can’t burst.)
It could be argued that the operators of these sites are hoping to trigger a “bubble collapse” simply by writing about it all the time, and offering opinion biased in that direction (even supported by stats; I’m reminded of the saying, there are lies, damn lies, and statistics, the latter of which can be conjured up to demonstrate almost anything). To what end? Perhaps they are renters, and want to jump back in post-collapse, and then reap financial rewards when/if prices go up.
Is this likely? Who knows.
But don’t believe everything you read.
Do your own homework, keep your ears open, take everything with a grain of salt.
And remember; when you hear an opinion, take into consideration who gives it.
Do they have a vested interest?
Almost everyone does, including me, as I’m hoping prices plummet so I can reduce my future mortgage as much as possible.”
– Martin comment at VREAA 31 Jan 2013, held up in the automatic moderation filter (likely because of length); also sent via e-mail; headlined rather than posted as comment.
—

Many thanks to Martin for the stories, and for sharing his thoughts about bias.

Anybody who downsized their RE holdings, or sold entirely, in the vague vicinity of the top, will do fine.
This will, however, end up representing only a very small percentage of owners.
Anybody who bought or ‘moved-up’ during the run-up, especially in its latter stages, was speculating on future price gains, even if they didn’t know it.
Those who purchased with leverage, with more than their entire net worth in RE, will be particularly fortunate if they end up lightening up at higher prices. In the vast majority of cases, this occurs by good fortune.
Martin used some skill in selling in so much as he was able to recognized the prices offered as being ludicrously high, and made the decision to take advantage of that, and he should be congratulated for doing so.

As to the discussion of bias of opinion, including that on this site:
Of course each and every argument has a source and, consequently, a perspective.
And it is wise to suggest that we all take careful note of the source of any opinion.
At the same time, I would suggest that it is far more important to consider the content of the argument than its source. This is one reason, in our opinion, that there is a place for anonymous commentary on the web: their are benefits to making content the focus of the discussion.

A waggish response to Martin’s fair objections concerning bias would be to make a quip something along the lines of “Yes, but my bias is the right one!”
The true word in that jest is that we do, indeed, believe that the evidence (the “statistics”, if you like) strongly supports the bear case. We genuinely can’t see how one can’t conclude that this is a market that’s very overextended and at high risk of a large price collapse. We accept that people arguing many other positions may see the market very differently, and may be just as sincere in their arguments as we are. And of course we are aware that some can make arguments in an insincere fashion, when they have other motives for putting out a certain message.

As for the argument that bears are trying to purposefully bring on a crash, I’d say that the thought greatly overestimates our influence. Remember, bears have been warning of the mania for many years and it has made absolutely no difference to the behaviour of the herd. A healthy and balanced market cannot be influenced by an opinion that it is not a healthy market; especially if that voice is heard by only a very small percentage of participants.
When a speculative mania collapses, reasons for the collapse are always sought. But manias end simply because they are manias; bubbles pop because they are bubbles. We have started a collection of ‘Erroneous Theories For Falling Prices‘ (linked in the sidebar categories section) which already has 7 candidates. Number 3 is “Vancouver RE Bears Caused The Crash” – excerpt:
“It is common, as speculative manias implode, for ‘naysayers’ to be blamed for the shift in sentiment.
But those same bears went unheard when the market powered ahead. Suddenly, inexplicably, people start listening to bearish predictions? No, the market turns of it’s own accord, and the sentiment change reflects the turn, not the bears suddenly gaining attention.”

– vreaa

Matthew Klippenstein Looks Back On Being A Vancouver RE Bear Since 2006 – “Although he and his wife earn well above the average household income in Vancouver, they’ve decided to continue renting.”

“This might be of interest to readers; as a Burnaby-ite (and way-premature housing bear) I noted the Canadian housing and debt situations in the first article I wrote for Green Car Reports about electric cars in Canada. [excerpt below]
I don’t want to throw the blog off-topic, but figured the link might be of mild amusement. I guess the older 2006 MacLean’s article reference might qualify under your “delaying buying” category. And if you had one, “premature calls of the top”. 🙂
– Matthew Klippenstein, via e-mail to vreaa, 22 Jan 2013

“Is that a housing bubble? A January 2013 cover story in Canada’s national newsmagazine MacLean’s argues that the housing market has become a popping bubble. While the U.S. housing bubble peaked in 2006, Canadian real estate peaked in spring 2012, with household debt reaching levels seen in America at the peak of the U.S. housing market. If Canadian consumers pay down their debt in coming years, the higher up-front costs of electric cars might stifle sales, even relative to 2012. (Full disclosure: the author was quoted in the above-linked magazine seven years ago arguing house prices were a bubble back then. He and his wife used the money saved by renting to purchase their plug-in Prius last fall.)”
– ‘Plug-In Electric Car Sales In Canada: A 2012 Review’, Matthew Klippenstein, Green Car Reports, 21 Jan 2012

“Every day Matthew Klippenstein, a 30-year-old fuel-cell engineer, goes online to wait for the sky to fall on the housing market. “House prices make me angry,” he says. Although he and his wife earn well above the average household income in Vancouver, they’ve decided to continue renting. “We’d rather be able to enjoy our lives and be able to afford to have kids.”
Klippenstein watches local housing prices on the site RealtyLink. He feels prices are inflated, and bases this view on information he’s gleaned from blogs forecasting a drop, and on the logic of Canadian financial gurus like Eric Sprott. … Klippenstein thinks the market will correct itself in the next 18 months. “When the bubble bursts,” he says, “there will be a lot of people who got swept up in a speculative fever, who’ll lose a lot of money.”
– from ‘Bubble, bubble, toil and trouble’, Kevin Chong, Macleans, 29 May 2006 [yes, two thousand and SIX – ed.]

“Life has worked out very well. I’ve learned to laugh at myself. 😉
We do still rent (the money saved did after all help us get a plug-in car!) and most importantly, are content to do so. Planning to move in the next year or two, since our place is getting a bit small with the three of us. Though admittedly, the problem is more than likely “too much baby stuff” than “not enough square feet”. Timing will somewhat depend on how fast and far the market falls.”
– Matthew Klippenstein, via follow-up e-mail to vreaa, 23 Jan 2013
—

Thanks for all this, Matthew.
Vancouver was indeed already locked in the jaws of a speculative mania in real estate by 2006.
Earlier, actually.
– vreaa
—

Matthew Klippenstein blogs at ‘Eclectic Lip‘.

“Our landlord subsidized our housing costs to the tune of $200,000 cumulative over 5 years.”

“I left Vancouver. Lived in the same amazing apartment for 5 years while dear Landlord subsidized our housing costs to the tune of $200,000 cumulative over 5 years. After 5 years of no rent increase, you would think that on leaving they would be ready to raise it !!!!
Wrong – – – –
Rent is down 8.5% on a nominal basis, 20% on inflation adjusted bases and if you are taking out strata/taxes, rent is down even more!!!
I would so love to go back to it – but now at that price point there is serious inventory and competition so the landlord is being aggressive to get the vacancy time as low as possible.
Did we throw money away on rent? No !! We lived it up, had a great place, and saved $200,000 compared to the cost of owning.”
– yvr2zrh at VCI January 19th, 2013 at 1:03 am

“People are listing properties for CRAZY prices hoping uninformed renters will pay their crazy mortgage.”

“$2000 / 3br – 2000ft² – Renters Don’t Pay These Prices (North Shore)
Renters don’t pay these crazy prices. There is more rental inventory coming on every day, and there will be even more at lower prices next month. People are listing properties for CRAZY prices hoping uninformed renters will pay their crazy mortgage.
All Craiglist prices are very negotiable and in the North Shore about $1 per square foot is fair. Unless the place is amazing (which every landlord thinks their property is) don’t pay much above this rate!!!”
– from craiglist, 5 Jan 2012 [hat-tip edinacloud]

“We live in Vancouver and it’s all we can afford” – “As though living in Vancouver and having no money go hand-in-hand”

“Have had a listing on Craigslist for almost a month to sell a nice quality baby car seat. Finally got an offer last night, 50% below asking because “We live in Vancouver and it’s all we can afford.” I put obo on the thing and I don’t care why you’re making the offer you are, but I just thought that was interesting, as though living in Vancouver and having no money go hand-in-hand, it’s a given that you have no money.”
– Angela at greaterfool.ca 29 Nov 2012 12:24am

Baloney Budgets – “I understand you’re trying to make Vancouver look like a place people would want to live. Every one of these case studies is misleading, and you are doing people a disservice by offering them as accurate.”

“Every one of these case studies is misleading, and you are doing people a disservice by offering them as accurate. I understand you’re trying to make Vancouver look like a place people would want to live (and therefore make money off assisting them with their relocation), but please exercise some ethical restraint. 1) There is nowhere in Kits Allison can buy a month’s worth of groceries for $170, unless she’s living off of plain oatmeal and carrots. Shopping at IGA, Safeway or Choices could easily run a person $100 per week, not including much protein, and she can forget the occasional bottle of wine. 2) Gerald is spending almost 50% too much on his apartment. Back before people thought of housing as a place to sleep instead of one more status symbol, the lender rule was no more than 28% of your gross salary should go towards housing. His $36k/year is $3000/month; 28% of that is $840, so his $1225 rent is $385 too high. An actual financial planner would tell you the same thing. But since he can’t rent a studio in Coal Harbour (or maybe anywhere in Vancouver) for $840, he’d be stuck in a basement suite in Dunbar or Kits. Do any of your prospective clients know how much of the city lives in someone else’s basement? Also, what about paying off his student loans, or did he luck into rich parents? 3) You have not factored in the impact of interest rates returning to their long-term norm of about 7% (never mind the rate reset they’ll face in a few years, courtesy of the bank). What does that do to Mara and Jeff’s mortgage amount? Also, where are these people eating out so cheaply? A nice dinner plus wine four times per month at the listed total means their final bill with tip is $60 every week. Please show me a restaurant where a couple can get a “nice dinner” including a bottle of good wine for $52 including tax; I’d like to go there. Do they have any existing debt to service? 4) Same interest rate problem as Mara and Jeff. Misleading people as to the actual costs of living in this city helps no one but yourselves.”
– Dan, commenting below an article at 2vancouver.com titled ‘Vancouver Money and Budgets: A few case studies’ [23 Nov 2012], that sketches out proposed budgets for people in Vancouver in 4 different situations. As Dan points out, the budgets have elements of fantasy about them. [hat-tip to VCI; posted here for the record.]

It’s expensive to live in this city, largely because of costs associated with accommodation. This is very, very bad for Vancouver: It forces young people away, and diverts resources from other areas of the economy. We’d bet that relocation companies like ‘2vancouver.com’ have some relevant stories they could tell. – vreaa

“Usually I see 5 or 6 three bdrm rental units for rent in Vancouver or Burnaby at $1600 p.m. or less. But recently that figure has gone up to around 35 to 40.”

“I’ve been looking at 3 bdrm rental units the past year. Usually I see 5 or 6 units for rent in Vancouver or Burnaby area @ price 1600 or less. But recently that figure has gone up to around 35 to 40.
You can get decent place for 1350 to 1550 per month with around 1100 sqft.”
– house burden at greaterfool.ca 17 Nov 2012 3:49am

Counterintuitive to some, the rental market will also weaken as RE prices soften and drop.
– vreaa

Spot The Speculators #89 – “Rent our charming turn of century East Vancouver home. The basement has shared laundry and a suite where we, your prospective landlords, reside.”

Visualize the basement

“$2400 / 3br – 1400ft² – Lovely quiet home in great neighborhood Available December 1st (Mount Pleasant / Cedar Cottage)
Date: 2012-11-11, 1:44PM PST
Our charming turn of century East Vancouver home is for rent.
Newly (as in will be finished in a week!) renovated kitchen with white shaker cabinets, dove grey quartz countertops, breakfast peninsula, mini office / computer area, dishwasher.
Hardwood floors throughout most of the house, living / dining rooms with big picture windows.
Three bedrooms upstairs: master bedroom with two large closets (one walk-in with a window for natural light), two smaller bedrooms with one closet each and big windows looking out to back yard.
One bathroom with soaker tub and skylight.
Back deck for bbqing and entertaining, big nicely kept back yard.
Front porch ready for your rocking chair.
Basement has shared laundry (and a suite where we, your prospective landlords, reside).
One year lease.”
– craigslist ad, 11 Nov 2012 [hat-tip Chem guy at VCI]

You can imagine the ‘math’.
Upside: “In 25 years, our tenants will have paid off our mortgage!”
Downside: “We live in a smallish, dampish, darkish box, with people stomping on our heads.”
…
Another example of Vancouver homeowners as speculators: decisions to buy/hold property based almost solely on expected future price strength.
When these homes were first designed and built, was there ever any intention for people to be living in the basements?
– vreaa

Cost To Rent A Luxury Two Bedroom Unfurnished Apartment In Desirable High Income Cities, And In Vancouver

– from ‘Sticker shock: Cost of living varies widely’, Mercer, 9 July 2012 [hat-tip clive]

Vancouver rents are pretty much in line with incomes; RE prices aren’t, yet.
– vreaa

“If house prices here don’t revert, ever, when I die at 100, I will have lived 100 years in rentals.”

“If I die tomorrow, I would have lived my entire 38 years (whole life) in rentals. And if house prices here don’t revert ever, when I die at 100, I will have lived 100 years in rentals, too.”
– Ray at VREAA 12 Sep 2012 12:35pm

“Would I buy in this market if I was in a “normal” situation? No. Does selling now and renting make sense for my family personally, given our current situation and lifestyle? No. Ergo, we’re staying put.”

“We love our house and location, will have paid it off entirely (and way early) in a couple of years, and will be able to put all the money we currently pay in mortgage into funding an early retirement. We’ll still have property taxes and maintenance, but it’s a helluva lot less than we’d pay to rent a similar home in our neighbourhood, and these costs can be covered completely by renting out a spare room for a few months in the summer to an international student if we want to do that (we have done it and enjoyed it in the past, so it’s familiar territory). Our family is in Van, so are both our jobs, so moving to another city makes no sense. Another reason that I am not interested in renting, besides the potential issues with crappy landlords, instability and the lousy quality of a lot of rentals I’ve seen is that we have lots of pets and fish tanks, and renting isn’t feasible for us. It’s hard enough to find rentals with just kids…try telling a landlord that you also have multiple cats, two large dogs and three 100 gallon plus tanks and watch them run screaming.
Would I buy in this market if I was in a “normal” situation? No. Does selling now and renting make sense for my family personally, given our current situation and lifestyle? No. Ergo, we’re staying put.”
– RESkeptic at VREAA 17 Sep 2012 7:49am

Sounds sensible, and we agree with the logic entirely.
Bearish opinions voiced here are not to be confused with a recommendation that each and every owner sell their home.
For people where a drop in the market value of their home of 50% is less inconvenient than the hassles of renting, owning continues to make sense.
– vreaa

Ah, Look At All The Lonely People – “With Vancouver’s sky-high housing prices, problems around affordability are creating resentment. There are a lot of people that just don’t feel welcome here.”

Vancouver may seem like a paradise, but behind the polite smiles, there’s evidence of loneliness, deep resentment and racial tension among some citizens.
Armed with these findings from two years of research by the Vancouver Foundation, Vision Vancouver Coun. Andrea Reimer is proposing to create an Engaged City Mayor’s Task Force. The 16-member force would devise plans to foster better relationships between citizens, and encourage broader participation in local government.
After surveying 3,841 people from more than 80 ethnic groups this year, the Vancouver Foundation found that one-third find it difficult to make friends in the city, and a quarter are lonely.
Many of the lonely people tend to be those living in high-density housing, and young adults who aren’t yet embedded in careers, Reimer said.
“There are a lot of people that just don’t feel welcome here,” she said.
With Vancouver’s sky-high housing prices, problems around affordability are creating resentment.
Over 60 per cent of residents aged 25 to 34 see Vancouver as “a resort for the wealthy,” with “too much foreign ownership,” according to the survey.
Frustration around housing is leading many to incorrectly place the blame on foreign owners from Asia, according to Reimer.
“There is a strong tension around race,” Reimer said. “We have to get ahead of that.”
Reimer said the task force would be composed of 16 volunteers from diverse backgrounds — half renters and half owners would be one division — and a likely focus of planning would involve encouraging neighbourhoods to get more involved in tapping into existing infrastructure budgets. The idea is to create public spaces “more aligned with what the community wants.”
– from ‘Lonely city: Vancouverites isolated, resentful; city council seeks answers’, The Province, 25 Sep 2012 [hat-tip joe_blown_away_by_high_housing_costs and others]

“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

“My deflation bet: I rent a lovely condo on Vancouver’s waterfront. I have no interest whatsoever in buying real estate here. My long term savings are mostly in cash.”

“It seems that consumer spending is the biggest force in the economy…and I wonder if consumers aren’t getting tapped out…financially and demographically. I wonder if they have used too much credit to buy “stuff” and are now at risk of setting off a vicious circle of deflationary trends if either the economy slows or interest rates rise…or both of those things happen. I wonder if manufactures made a boo-boo and figured that consumers would keep buying “stuff” and now those same manufacturers are sitting on warehouses full of inventory…financed by banks…and if that inventory doesn’t move the manufactures will have to lay off workers…making their contribution to the vicious circle of deflationary trends.” …
“My deflation bet: I rent a lovely condo on Vancouver’s waterfront…I have no interest whatsoever in buying real estate here. My long term savings are mostly in cash.”
– Victor Adair, Senior Vice President and Derivatives Portfolio Manager, Union Securities, at moneytalks.net 10 Sep 2012

“Currently I rent here in Vancouver as it’s the only fiscally sane option. Returning mortgage rules to responsible levels makes it far more likely that one day I’ll be a first-time buyer.”

“We do clearly have a bubble and it will burst. It’s wreaking havoc on Vancouver’s ability to retain creatives, families, and increasingly even high-earning professionals. It has a profound negative effect on quality of life here. I am just starting a family. Currently I rent here in Vancouver as it’s the only fiscally sane option. Returning mortgage rules to responsible levels makes it far more likely that one day I’ll be a first-time buyer.”
– Many Franks, comment in the Georgia Straight, 3 Aug 2012 16:27

“As a man in my late 30’s, living in Vancouver, who has done better than average in terms of income over the last decade, I can say that owning a home here is almost impossible without putting yourself in a state of constant stress.”

“As a man in my late 30’s, living in Vancouver, who has done better than average in terms of income over the last decade, I can say that owning a home (not a 600sq ft box in the sky) is almost impossible without putting yourself in a state of constant stress. I have averaged about 150K a year, and still, living in Vancouver proper, in a house, is out of the question. I have no interest in being house poor due to over blown house prices. It is so very frustrating to live in a city where people heads are buried in the sand with regards to what is a “normal” condition for property values. I still hear from those “in” the market, that “it won’t go down”… “There is only so much land”… “People want to live here.” Vancouver is a city where the average person is either on the outside looking in, or living in fear that they are going to lose everything because they bought into the hype of the high school educated Real Estate agent. And listening to the banks opinions about housing prices, is like your neighbourhood dealer telling you that crack isn’t addictive.”
– DJIVB, comment at bnn.ca 23 Aug 2012

“We keep trying to pay up in rent to get a bigger, nicer place. They are invariably listed for sale.”

“We keep trying to pay up in rent to get a bigger, nicer place. They are invariably listed for sale. I’m talking three in the last week that my unsuspecting wife finds on craigslist. Pretty soon this is going to piss her off. I’m scared.
All I can say is thank God we’re not forced to move yet. That was three out of three by the way.”
– Thomas Holloway (Zerodown) at VREAA 23 Aug 2012 11:37am

The mania has made renting less stable and more of an inconvenience than in more normal market environments.
– vreaa

“So the next place I rented was the main floor of a house, and guess who lived in the basement? The owner.”

“I used to live in a basement suite when I was in college. Fortunately it wasn’t damp or moldy, but it was too dark for my taste and I didn’t like someone living upstairs from me.
So the next place I rented was the main floor of a house, and guess who lived in the basement?
The owner.
If that’s what it takes to buy a house in Vancouver the trolls can have it.”
– Legacy at VCI 21 Aug 2012 9:58am

Vancouver’s Remarkable Price:Rent Fundamentals – “About to sign a lease, at a 420 price:rent ratio, on 1 year new house built by Asian owner, 1800+ sf, pulled off MLS recently due to no buyer.”

“About to sign lease on 1 year new house built by Asian owner, 1800+ sf, pulled off MLS recently due to no buyer. Now about to be rented to yours truly at ~35 years Price-to-Rent ratio after talking down rent by $100/m. [Thus 420 monthlyrent:price ratio. -ed.]Landlord still has a couple houses near completion. Who knows what happens to the tenant if the landlord goes bankrupt?”…
“I’m moving from a 1Br+den 670 sq ft condo at 283 months (23.6 years) rent, to (the aforementioned) 3Br newer house at 415 months (34.6 years) rent. Definitely makes more financial sense to rent than buy. Viewed a 3Br 1000sq ft newer condo few days ago at 305 months (25.4 years) rent, but passed (interesting to note that property manager is a realtor, guess managing client’s property might be what’s keeping them busy these days!)
– VMD at VCI 17 Aug 2012 10:00pm and 18 Aug 2012 11:22am

An example of a ‘speculative hold’. The owner believes prices will rise in future and is holding the property not for rental yield, but for assumed future price increases.
We are of the opinion that a good percentage of this kind of inventory will be put on the market at significantly lower prices, as it becomes clear that a downward trajectory for prices is establishing itself.
And, yes, this will be disruptive to tenants. The rental market is less stable through a speculative mania in housing, and the unwinding thereof.
– vreaa

Other current sky-high Price:Rent ratio anecdotes from the same VCI thread:

“I am living in Richmond with an (assessed value) : (rent) ratio of about 285.
Strata fees and property taxes not included, why buy now?”
– Anonymous 18 Aug 2012 10:04am

“I’m renting a house in SE Burnaby. Price to rent is somewhere between 350-370 on the conservative side. My best friend is the landlord and I’ve urged him to consider selling. But he will have nothing to do with it. Already has over $1.5mil RE exposure with little other savings. Oh yeah, still looking to buy another investment property because “RE does so much better than the stock market”. Just can’t save people from themselves.”
– How much?? 18 Aug 2012 10:27am

“Here is a unit that has been listed on CL for months (available now) for $2650 per month. The same units are listed for sale at $839K to $879K. So even if they get their asking rent the PR is 316 plus.”
– Anonymous 18 Aug 2012 12:36pm

“Beat you all. 4br house on Ontario. 2012 sale $1.35M. Monthly rent $2850, 2 yr lease. Price/rent 474. I love living here but wouldn’t buy at half the price.”
“Our landlord purchased the property earlier this year as an “investment”. I really can’t understand their business model. The house is an original, nicely-maintained bungalow. New paint, new dishwasher etc.
It’s not a quick flip (we have a 2-year lease) and it’s not a tear down and rebuild, which might make sense. The landlord is shelling out $3k or whatever per month to hold the property. They seem to be invested for the long term.
Of course the potential downside for us is a forced move if the house is sold. We figured that by the end of our lease the house will likely be underwater so that the landlord would not be in a position to sell. We will see how that goes.
I should add the landlord couple are very nice people and I don’t wish them any financial hardship.”
– No Money Down 18 Aug 2012 12:37pm and 19 Aug 2012 10:10am

“I have a whole house (unlike many, home owners, I have no tenants in the basement to worry about) on a nice street off The Drive, assessed at a little over 410 months’ rent.”
– N 18 Aug 2012 1:56pm

“I’m in a 3 bedroom house (we have the place to ourselves), 5 year lease for $1600/mo. House is worth $750,000 based on comps for a ratio of 468.”
– Vulture Fun 18 Aug 2012 11:34pm

“I pay $850 a month for a condo in Surrey. Same unit 2 floors up sold for $253,000 in late 2011. So a ratio of 297:1. You guys are insane with your 400′s ratios.”
– ScubaSteve 19 Aug 2012 12:39am

“I am the winner. I pay 4,400 for a 3,800 ft 6 bedroom (or is it 7?) house in west side.
Assessed close to $3.0 million. For now this is a 660 multiplier.
At the higher price points, it gets more and more un-economic to own and rent these houses out.”
– Van Coffee 19 Aug 2012 8:48am

“I’m at 489 but if I take off the huge strata fees that my landlord pays I go to 696. Strata and ppty tax eat up exactly 50% of my rent cheque. Not a lot left to pay the mortgage and occasional special assessment.
BTW…for all you haters who think we renters are basement dwellers who are broke, I’m writing this poolside in Osoyooss. Thanks landlord!”
– McLovin 19 Aug 2012 11:01am

“For the record – we are in a $1.5M Condo. Strata and taxes are over 1,000 per month and the rent is 3,500 gross (2,500 net of landlord costs). This give you 600.
Property value is no more than the day we moved in.
This represents a $200,000 plus savings and building of equity by renting (we built equity by renting – – – sounds strange).”
– ZRH2YVR 19 Aug 2012 4:52pm

Westside Renter – “Am I doing financially OK compared to others? Because I feel poor and worry about money all the time.”

“I am 41 years young living in Vancouver. I earn $100K a year and I have $275K cash, $20K TFSA, $200K in RRSP. I have no debt, but renting a place on the west side. My question is, am I doing financially OK compared to others? Because I feel poor and worry about money all the time.”
– Finally at greaterfool.ca 1 Aug 2012 12:10am

41 years old; $100K income; $500K net-worth; no RE exposure.
Important unknowns:
Dependents?
Guaranteed pension?
Capacity to save?
Level of investment savvy?
Target age at retirement?
– vreaa

“I sold the last of my 3 places recently. To be honest I was a bit worried about how it might impact my ego having to convert to being a renter and the feeling that I might be throwing money away.”

“I sold the last of my 3 places recently and I’ve said how happy I was to be out of the market. That’s certainly true but to be honest I was a bit worried about how it might impact my ego having to convert to being a renter and the feeling that I might be throwing money away. Well I’m happy to say it’s fantastic renting! All of the problems I used to have to spend all of my spare time fixing – the hundreds of trips to Home Depot, etc, not just on repairs but filling the house with things that perfectly outfitted it. At first I missed those trips but now I realize all the money I was spending. When renting we don’t have to worry about how the place looks because we might need to sell one day. And all the time and energy I’m saving allows me to be doing what I should really be doing – spending time with my young kids.”
– No Noise at VCI 13 Jul 2012 6:09PM

“I went for lunch today and I wasn’t scorned by my friends for being a bear. I can’t find anyone to argue with anymore. The harsh reality of a very long move down is sinking in.”

“I went for lunch today and I wasn’t scorned by my friends for being a bear.
The fun is over. I can’t find anyone to argue with anymore. The harsh reality of a very long move down is sinking in. I am sensing big time panic among a lot of people out there.
Truthfully I thought it was going to be fun but I think it is just going to be sad.”
– McLovin at VCI 30 Jun 2012 9:46pm

Yes, it is going to be a largely sad affair.
And definitely less fascinating than the mania itself.
– vreaa

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

“I asked our new landlords if they planned on selling. They said they considered it, but decided they were likely to end up as “wealthy land owners” if they just hung on. My husband and I are both born and raised here, and we’re never seen stranger times.”

“We’ve been in a big 100 year old fourplex near Main Street, virtually rent-controlled, for nearly 14 years. Our landlords, who are far from amateurs (a family business that includes an entire apartment building), felt that the market had “plateaued” and listed the house about six weeks ago for $1.4 M. It wasn’t exactly what I wanted to hear but I supported his decision and still do; they’ve been excellent, honest, non-gouging landlords.

I’ll admit the open houses were extremely unpleasant given how long we’ve been here; our kids have spent their whole lives here. It sold in a couple of weeks to I believe first time buyers, who have evicted us to take over our suite. After a bad couple of weeks, someone responded to one of the signs we put up in the neighbourhood and we’ve put down a deposit on a lovely place (albeit for more rent, but much nicer than we currently have, and still reasonable by Vancouver standards).

You couldn’t pay me to be in the new owners shoes. They just put down (presumably) $1.4 M for the privilege of living in a suite that rents for $1525 and on top of that have to manage 3 other suites. It’s an old house so the bedrooms broil in summer and freeze in winter, and running the microwave trips the fuse. The wood in the sunroom is rotting. The laundry is down 3 flights of stairs and around the back of the house (no joke in the middle of winter). I’m guessing the value of Vancouver houses over $1 M will drop fairly soon, given F’s new cap. Yet amazingly I’m guessing they’re over the moon at their opportunity to “get into” the market.

Our new landlords are in the their early 30’s with not particularly high-paying jobs. I’m guessing Bank of Mom and Dad had everything to do with them owning a house. I asked if they’re planning on selling it, and they said they considered it back in the spring, but decided they were likely to end up as “wealthy land owners” if they just hung on. So unless they have a material change of heart, it looks like we have some stability again.

My husband and I are both born and raised here, and we’re never seen stranger times.”

– Exile on Main Street at VREAA 6 Jul 2012 7:06pm

Scientists Skip The Math – “No calculations or economic analysis are needed, my co-workers in the science/engineering/technology sector and my friends are always certain that buying is always a better choice. My choice to rent always seems to puzzle them.”

“My choice to rent always seems to puzzle other people. No calculations or economic analysis are needed, my co-workers and friends are always certain that buying is always a better choice. My friend just bought a house before the mortgage rule change, and didn’t take my advice. We all work in the science/engineering/technology sector (not in Alberta) but he is completely oblivious to what’s happening in the rest of the (economic) world. He’s the type that truly believe Canada entered and emerged from the 2008 recession unscathed. Actually, he didn’t even know there was a crisis in 2008 and there will (probably) be one from the next country exiting the Eurozone! It’s sad that these are the types of people that are trying to give me advice.. All I can do is be as humble as possible… but it’s frustrating… My point is – the herd thinking is a very strong force. One that I refuse to believe in.”
– Petr Syk at VREAA 8 Jul 2012 5:54am

“I really hope for there to be a big crash. That would probably be the only way to get a place for myself.”

Deborah Cheng has resigned herself to staying with her parents for a few more years unless Vancouver’s housing bubble bursts.
“I really hope for there to be a big crash. That would probably be the only way to get a place for myself,” said Ms. Cheng, a 30-year-old administrative assistant.
She’s saved $90,000, hoping to put a 30-per-cent down payment on a home. But in Vancouver – where the average price of a detached house this year is $732,736, according to the Canadian Real Estate Association – her options in the $300,000 price range are older-studio and one-bedroom units in high-rise buildings.
“You find out that the building is pretty run-down and you might have to pay a lot for repairs in the near future.”
– from ‘For many, new mortgage rules put home ownership out of reach’, G&M, 21 Jun 2012

Patience.
– vreaa

“This weekend I was hit with a notice to end Tenancy. The owner has claimed they will be moving in. I know that they also own at least 4 other places in Vancouver and that they reside in China.”

“This weekend I was hit with a notice to end Tenancy. The owner has claimed they will be moving in. I know that they also own at least 4 other places in Vancouver and that they reside in China. How many of these other 4 investment properties have also been given notice? Will the owner also be “moving in”?
I knew this was going to happen as I believe fear has hit East Asia. If I do find out the landlord has sold and not moved in as promised I’m privy to some compensation. However, with a owner out of this country will I ever see the money?
Will renters in Vancouver be forced to move as a record number of speculators love their money out of the market?”
– via e-mail to vreaa, from ‘please withhold my name’, 3 Jul 2012

It is highly likely that plunging prices will be disruptive to many renters.
Amateur landlords will be bailing, and that will often involve renter eviction (legal or not).
At the same time, as we approximate prices supported by fundamentals, where good old-fashioned cash-flow makes owning properties good investments, we will increasingly achieve a situation that is good for renters seeking long-term stability.
– vreaa

“I moved to Vancouver in 2008 and despite being able to purchase, have held off due to the insane RE market. For now, I will continue to rent.”

“I moved to Vancouver in 2008 and despite being able to purchase, have held off due to the insane RE market. I rent a large beautiful home with a pool in the Dunbar area. Landscaping and pool maintennace are included in the rent, so needless to say, I have a very nice life style here. For now, I will continue to rent. If I ever consider purchasing a house here, I will offer well below market value. For now, I am having too much fun and can’t be bothered to look at the crappy homes listed for so much money.
The reason that I came to Vancouver is that my two children are attending UBC. They are now close to graduating and will likely have to leave Vancouver for a place with a more reasonable cost of living/RE. I will likely leave as well so that I will be in a better position to help them financially. This is too bad, as I like Vancouver, the people and lifestyle. I am afraid that many people are going to be seriously hurt by the artificial RE market here and will end up losing everything or become slaves to the bank for the rest of their lives.”
– DR, via two e-mails to VREAA, 24 Jun and 2 Jul 2012

“It means my total family income would have to be an exorbitant amount to afford an $800,000 house.” [Bizarre Idea!]

Another new rule announced by Mr. Flaherty sets the maximum gross debt-service ratio – the percentage of household income being used to pay for housing – at 39 per cent so buyers will be less likely to take on mortgages that are too big and could leave them floundering if rates increase.
That’s the one that Andrea Benton, a 37-year-old entrepreneur in North Vancouver, B.C., said hits her family of four hardest.
“It means my total family income would have to be an exorbitant amount to afford an $800,000 house,” she said.
The changes in mortgage rules over the past few years have made owning a house less desirable, she said. While she understands the government’s intent is to bring prices down eventually, she said, “It feels a little Big Brotherish to me,” and questions whether it will have its intended effect on the hot North Vancouver market.
“We’re probably going to be long-term renters,” she said. “The closest I’ll probably own anything is a condo when I’m 65.”
– from ‘For many, new mortgage rules put home ownership out of reach’, G&M, 21 Jun 2012

The speculative mania in RE has desensitized Vancouverites to the actual meaning of large numbers.
– vreaa

“As a long time tax paying bear bitter about subsidizing the largess lifestyles of those that could not afford it, I will bloody well be a “I told you so type” in the coming years.”

“Get ready and get defensive and don’t gloat and be paranoid. This is going to get ugly starting today.”
– Ham Solo at VCI 22 Jun 2012 4:04pm

“As a long time tax paying bear bitter about subsidizing the largess lifestyles of those that could not afford it, I will bloody well be a “I told you so type” in the coming years, albeit perhaps in a more strategic and tactful manner. My coming line will be, “well, if I make more than you, and I sat on the sidelines all these years, doesn’t that tell you something about your ability to afford these ridiculous prices and the sustainability of those prices.” Or maybe something softer like “you really should get in on renting – paying an underwater mortgage is really throwing your money away now with nothing to show for.”
As a six figure single earner, you can be damn straight I will be saying this and I will be bringing it up at every social event, as that would be keeping with the trend of talking about RE at pretty much every social event in Vancouver of the past umpteen years (and no RE is not raised at every event, but RE is a obsessed about topic in Vancouver).
Why should I have to take shit all those years as a stigmatized “poor renter” while prices climbed to the stratosphere, and every hairdresser and Home Depot associate making 50k a year was buying a condo, leasing a BMW, taking Mexican vacations, and buying multiple properties, and then not be able to be righteous when prices crumbled. These people were acknowledged as “investment geniuses” on the way up, so now they can be regarded openly as “investment morons” on the way down.
Payback is a bitch – but we all need to learn that to prevent another bubble in our lifetimes (however unlikely that really is).”
– Payback at VCI 22 Jun 2012 4:28pm

More Social Isolation In Vancouver Than Other Cities? – “Residents feel increasingly estranged from their friends, their neighbours and their communities. More than half of respondents agreed that Vancouver is becoming a resort town for the wealthy.”

“A survey conducted by the Vancouver Foundation and released today found Metro Vancouver residents feel increasingly estranged from their friends, their neighbours and their communities.” …
“Affordability factored heavily in the survey results, with roughly equal numbers of people reporting living comfortably and finding it difficult to get by.
Significantly, more than half of respondents agreed that Vancouver is becoming a resort town for the wealthy and that there is too much foreign ownership of real estate. This view was particularly common among people aged 25-34, a group whose responses to many survey questions revealed a marked cynicism about the state of their communities compared with other age groups.”
– excerpt from ‘Social isolation has far-reaching effects on us and our neighbours, survey says’, Tara Carman, Vancouver Sun, 18 Jun 2012

“I am in that age group and this accurately describes how I feel.”
– joe_blown_away_by_high_housing_costs at VREAA, 18 Jun 2012 9:25am [Thanks for the link to the article, joe. -ed.]

The Vancouver Foundation survey itself available from their website as a pdf:
Connections and Engagements, A survey of metro Vancouver, June 2012, Vancouver Foundation

More from the Sun article:
“Bob Cowin spoke about losing a sense of connection with his neighbours over the years. Cowin moved into a new subdivision in Coquitlam in the mid-’80s where the developer had landscaped the front yards, but the backyards were nothing but mud. Neighbours got to know each other creating their back gardens and building the retaining walls that were necessary because most properties backed onto a mountain slope.
“Swinging a sledge hammer and dashing down to the local building supplies store for a different drill bit resulted not only in walls but also relationships,” Cowin wrote in an email.
A year after the retaining walls were finished, Cowin noticed a new kind of wall going up: cedar fences between properties that made the neighbourly conversations that used to happen over the fence impossible.
A burst of young children brought the adults in the community together in a different way, forming child-minding co-ops and walking school buses, Cowin recalled. The elementary school became a social hub, and the neighbourhood held yearly block parties.
Then the children started middle school and didn’t need their parents as much, he said.
“The street was extended, and the sense of a local place disappeared. Houses started being sold, and a different, and increasingly multicultural, demographic moved in.”
Cowin feels the increasing ethnic diversity was a mixed blessing for his neighbourhood.
“It has been great for our kids, who, thanks in large measure to the schools, have developed a tolerance and intercultural competence that I admire,” he said. “For the adults, language and other barriers have made it tougher. My new neighbours are still fine people, but it takes more effort and intentionality to maintain relationships.”
—

The entire Sun article is worth the read, as is the comments section below it.
The phenomenon of “isolation in the city” (“water water all around but not a drop to drink”) is by no means new. Is Vancouver really any different from other big cities in this regard?
We don’t know of any data that could allow one to objectively compare. Are the findings in this survey very different from similar surveys elsewhere?
We are certain, however, that there is a substantial subgroup of locals who feel strained by Vancouver’s housing prices: either by the financial burden of ownership, or from the distress of feeling ‘priced out’ and (for many, but not all) the consequent sense of ‘not belonging’. And we know that such strain is not good for the health of individuals, families and communities.
Also, the very high cost of housing creates an implied large wealth disparity across the owner/non-owner divide that would not be present in times of more normal housing markets. Such a disparity is closely correlated with dissatisfaction within a community.
– vreaa

“Their combined family income is just over $200K per year. They could buy a SFH but don’t want to, because, in her words, it would be a dump and they’d be elbow-deep in mouseshit and stucco for 3 years. Should have seen her eyes when I told her she is in the top 1%.”

“Met a nice fellow today at an event who said he and wife make just over six figures (combined) and were just pre-approved for $1.2 mil. He said he knows they can’t afford more than $400K at present rates. But nice lady at the bank said not to worry – rates aren’t going up soon. Wonder where she heard that from, and what “soon” is in the context of a 30 year shackle. A friend sells mortgages at same bank. Nice gal. Earns $46,000 a year, dropped out of general arts in her 3rd year of undergrad, took a mandatory 5 day combined mortgage/financial advising course at the bank, rehashes one page flatsheet talking points to existing bank customers.”

“I work with a very nice gal whose combined family income is just over $200K per year. They own a 2 bdrm condo in East Van and can’t afford a SFH but desperately want one because of growing family. Actually that’s not true – they could buy a SFH but don’t want to, because, in her words, it would be a dump and they’d be elbow-deep in mousesh!t and stucco for 3 years, and they actually want to buy vegetables and contribute to an RESP for their kid but couldn’t afford to with an $800K mortgage. Should have seen her eyes when I told her she is the 1% – she figured you needed at least $500K per year. Nope… $230K. What’s 35% of that? After tax: $3,500 per month. With rates up 200 bps in 3-4 years… that’s probably getting you a $500K mortgage or a bit better by my math. Yeah, that’s a healthy market… the 1% can only buy half of the “average” house without a hefty DP.”

“This is what sickens me and drives me to post my useless rants on [RE Talks] – not (just) that I want to buy a reasonably priced SFH in the LM. I’m not some bitter lefty renter – I’m a fiscal conservative to the core, and own property outside the LM. I just can’t stand to see the lies and deceit that will harm so many people while the insiders make out like bandits once again.”

– Arthur Fonzarelli at RE Talks, 15 Jun 2012 10:08pm

Four stories in one here:
1. Couple earning $100K+ pre-approved for $1.2M.
2. In-house bank salesperson selling mortgages with minimal training.
3. Family earning $200K+ reluctant to move up because of perceived low value in SFHs.
4. Fiscal conservative RE owner seeking a “reasonably priced SFH” in the lower mainland.
Common themes?
Readily available cheap credit resulting in elevated home prices reflecting very poor value.
– vreaa

“We sold the townhouse in Richmond in July 2011. We realized that it was time to get out if we want to realize the equity growth. The urge to buy something next – a SFH – was tremendous after we sold.”

“We sold the townhouse in Richmond last July 2011 – we realized that it is a time to go out if we want to capitalize the equity growth. Since then the prices in our segment are only going down. Slowly though. The urge to buy something next – a SFH – was tremendous after we sold. The anxiety that we would loose the opportunity and all the media hype around it etc. I am so glad that we resisted and renting now. We rent a new (expensive) home in the best area that we would not be able to buy in. I found the experience of renting to be very beneficial for my overall understanding of the house we would need, it is like we got to try different type of houses before we get into the “no turn back” purchase contract. I already see that I would not want the house like the one we are renting now although it is new and my understanding improved of the necessary features our family needs. I am looking forward to move out for the next home experience. Some people would try to scare us by “renters forever” – well, it is better than to be forever in debt, when the bank owns part of your home.”
– olga62 at VREAA 12 Jun 2012 9:09am

“If I sold now, I would be in a position of weakness – I’d have to rent.”

“It’s a sunny afternoon in a Toronto industrial park, and a group of about 60 laid-off factory workers are gathered for a farewell barbeque.
The Honeywell workers lost their jobs 15 months ago as the valve and parts maker shifted production to lower-cost factories in Hungary, China and Mexico.
But it isn’t as easy as picking up and moving. “I have to take care of my father – he’s 82,” says Brendan Andrews, a machine operator, who lives in Belleville, Ont.
Instead, he’s accepting an $11-an-hour job – a wage reduction of 50 per cent – that is non-unionized. He started on a 7 am to 7 pm shift last week.
Mario Garofalo also can’t move. The 42-year-old assembler, who worked at Honeywell for 14 years, doesn’t want to sell his house and leave his parents, girlfriend and nieces and nephews behind. “If I sold now, it would be in a position of weakness – I’d have to rent. I would use up money for other things, and on living expenses,” he says.”
– from ‘Stuck in place: Canada’s mobility problem’, G&M, 6 Jun 2012 [hat-tip KC via e-mail, and Makaya at VCI]

Years of RE-cultism blurs the thinking.
– vreaa