Category Archives: Uncategorized

In Case You Thought Our Bubble Was Due To Special Local Factors…

“Johan and Alejandra are the kind of Swedes the IMF has been warning about – piling up debt to keep up with an ever-rising property market and fund a lifestyle of travel, maids and nights out.
The couple plan to buy a flat in Stockholm for 5 to 6 million Swedish crowns ($724,000 to $869,000), initially with an interest-only bank loan, among other spending plans.
“I may travel, I may want to invest in a new business,” said Alejandra, who runs a cafe in the city centre.
Less than a month away from a general election, there are no votes in campaigning to stop the credit flowing, but there are fears that such Swedes could be the Achilles heel of a country that boasts a coveted AAA score from credit rating agencies Fitch and S&P.
Four in 10 mortgage borrowers in Sweden are not paying off their debt, and those that are repaying the principal do so at a rate that would on average take nearly a century.
Swedish property prices have nearly tripled in just two decades. In July, home prices rose at a double-digit pace from a year ago – the first time in more than four years.”

– from ‘Swedish household debt soars as poll nears’, CNBC, 24 Aug 2014

“In the capital the latest full-year figures show that the average wage is £39,920, while the average house price is about £400,000.
Prices are therefore 10 times greater than wages.
But in South Buckinghamshire, in towns like Amersham and Beaconsfield, the average home is worth 20 times as much as the annual local salary.
Outside the South East, the place where houses are least affordable is the Cotswolds, where they cost 19 times wages.
The countryside may be scenic, but that is little compensation when the average worker, putting a third of his or her salary into a mortgage, would need over 60 years to pay it off.” …
“”I shall be disappointed if I only get £550,000 for it,” says Mike Golding, as he shows me into a two-bedroom, first-floor flat he is selling. It has no garden, few proper windows, and no view to speak of.
But such prices are not excessive in Stow on the Wold, a pretty market town in the Cotswolds, where the undersupply of affordable housing is matched only by the oversupply of Barbour jackets, local organic brie and bow-windowed tea shops.
One such tea shop is run by Anna Wright and her mother.
She and her boyfriend have been looking for a house to buy, but, faced with prices like the above, they have given up looking in Stow.
“We have been priced out of the market,” she says.
“You are privileged to grow up in the Cotswolds, but there’s never an expectation of buying a house here,” she tells me.
A few doors down, 21-year-old shop worker Nicola O’Driscoll is in the same position.
She has been forced to look for a flat in Cheltenham, no less than 18 miles away.
“It’s really unfair. I feel like they don’t want youngsters to live around here. Because there’s no way they can,” she says.

– from ‘The 62 areas where houses are less affordable than London’, BBC, 18 Aug 2014

Too-cheap money has caused many speculative bubbles in housing, and perverted the relationship between income and housing prices. – vreaa

Curmudgeonly Contrarians Win Again (In The End)

“The thing that intrigues me most about his career is how, like Stephen Roche and so many of the great names who have conquered the Tour before him, the American has never encountered doping in the sport. In an extensive interview with L’Equipe on Monday he was asked if cycling still had a drugs problem? “I have no idea,” he replied. “There is none in my team. And none in any of the teams I have raced with. The Festina affair was a huge surprise to me.”
And you never spoke about it in the peleton?
“Now that you mention it, no.”
Incensed by the innuendo, Armstrong insists that his life is an open book. He says he is clean and has no secrets and asks us to treat his achievements with the respect they deserve. Should we? Sorry, but for some time now I’ve had a problem with fairytales in sport. For the moment I’m reserving my right to applaud.”
– Paul Kimmage, in an article ‘Reserving the right to applaud’, Irish Independent, 26 July 1999  (yes, nineteen ninety nine).

This contrarian was ‘wrong’ for at least 13 years.
Now he’s right, and the underlying facts of the matter seem so self apparent to all observers.
Of course Armstrong doped, how else could he have won 7 Tours in a row?
RE bubbles are like ‘fairytales’, too.
Of course this was a speculative mania, how else could Vancouver RE prices have risen to the point that the average home was ‘worth’ 11.5 times average annual income?
Vancouver RE contrarians have thus far been ‘wrong’ for up to 10 years, but the jury is making noises that it is returning with a verdict.
– vreaa

“What’s REALLY Good About Vancouver?”

Vancouver is a fine city, let’s embrace it for its own considerable strengths. Here follows an account of things and qualities that many of us find really good about our city. It emphasizes features that have guts and soul and spirit, and those that are arguably of lasting value.
Suggestions for additions/alterations warmly welcomed, and given due consideration. The quotes in italics are from commenters.
This kind of endeavour, like the city itself, is invariably imperfect.
– vreaa

What’s REALLY Good About Vancouver?

1. The Rain
Large quantities of good, honest water that falls on our heads more days than not; bearing juicy air and verdant lushness. 
We live in a rainforest. Celebrate it; accept it.
“Nothing better than being in a cedar forest on the north shore during a rain storm.”

Did we mention the rain?

2. The Mild Weather
By Canadian standards. Seems contrary to (1) but, not so.
“Not actually needing to use a engine block heater is pretty nice. Not needing to breath through your nose in -30 degrees is also very good.”
“This was yesterday in Alberta. For many people that matters.”:

Not Vancouver

3. The Air
Clean! See (1).
“Scent of pine, fir, cedar with hint of salt air”

4. The Vistas; The Mountains
Clear day, from many vantage points around the city, mountains with or without snow, city below; stunning. Sometimes good with cloud, too.
View from Grouse Mountain (whether you choose to ride or grind).
Sunsets over the Burrard inlet, from various vantage points.
You don’t have to leave the city to leave the city.
“The splendour and diversity of the natural environment, and the way it interpenetrates the city.”
“It’s a dramatic panorama that I haven’t become tired of looking at.”

5. The Seawall; The Ocean
Kitsilano to Coal Harbour, especially the bit near the Lion’s Gate Bridge.
“I love walking around the seawall talking with a friend on misty nights in mid-winter when all the tourists are gone.”

6. Stanley Park; The Endowment Lands; The Trees
Wonderful trees, quiet paths, remarkably low traffic.
“I like that this big, public, tourist park has hidden seasons and palettes that feel like a spectacular secret, and that in such a busy city you can find quiet and solitude in there.”
“The intensity of the vegetation, the size and lushness of the trees.”

7. Easy Access to Outdoor Activities and Wilderness
Sit, Walk, Hike, Run, Bike, Blade, Climb, Paddle, Sail, Ski, Board (Snow & Skate)
“The ability to step from the urban environment into true wilderness.”

8. Beaches
English Bay; Kits Beach; Jericho; Spanish Banks; Wreck Beach
For hanging out when the sun shines, more than for swimming.

9. Kits Pool

137m of saltwater, in the rain

10. “Walkability/Rideability”; The Traffic
It’s actually easy and pleasant to get around.
The Canada Line: a great start
‘Traffic’ may seem a controversial item, but you can indeed travel in or on a vehicle, across town and back, during business hours, most days, with ease.
The Seabus to Lonsdale Quay

11. City Parks; Street Trees
200 parks; 130,000 street trees

12. Buildings
Marine Building; Hotel Europe; Dominion Building; Sylvia Hotel
Gastown facades
Museum of Anthropology
The Grace
The ‘tree-on-top’ building near English Bay

The Marine Building

13. Art
Art in public places
Vancouver Art Gallery
Art walks; Culture crawl; Commercial galleries; “Hidden galleries”
The Western Front
Emily Carr school annual shows

‘229.5 ARC X5’ by the French artist Bernar Venet, at Vanier Park

14. The Museum of Anthropology

15. Delicious Food; Good Restaurants
[Too many to mention. Imagine your own three favourite restaurant names here]
“The variety and deliciousness of much of the Asian food, the excellence of some of the high-end restaurants.”
“Fulfilling an almost depraved affinity to HK-style diners”

16. Different Neighbourhoods; Cafe Culture; Easy Urban Living
Parts of Davie, Commercial, Main, Gastown, Kits, East Van, other.
Hanging out.
“I love the chaos of Davie Street at night, and the weird festival grinning-atmosphere that it gets when it’s NOT fireworks or Canucks or soccer.”

17. “Relative Tolerance”
“For the most part, we get along.”

18. Music; Music venues
The Railway Club
The Orpheum; The Commodore; The Vogue
The Vancouver East Cultural Centre
The Chan Centre; Vancouver Recital Society; VSO
The Vancouver Folk Festival

19. Movie houses
Cinematheque; The Rio; The York (will reopen); The Ridge (will die?); The Dunbar; Many comfortable new vanilla theatres

20. VIFF
The Film Festival
“It’s not a red carpet affair and all the directors, actors, writers and producers who come here seem to be genuinely interested in talking to the audience.”

21. Comedy; Improv; Poetry slams
Dozens of venues

22. The Vancouver Aquarium
Belugas; Dolphins; Jellyfish
“That one seal that seems to recognize us every time we visit”

23. Granville Island
Especially on Canada Day, with ‘The Carnival Band
The Aquabus around False Creek

24. Cherry blossoms; Rhododendrons; Gardens; Gardening

25. Wildlife
The Crows; Bald Eagles; Coyotes; Bear

“I love watching our crows commute at sunset from all over the region, a ribbon that floats east for the night and confounds researchers because they don’t know why Vancouver crows should be so sociable.”

26. Some really good stuff has been made here…
William Gibson (writer), Jeff Wall (photographer), Douglas Coupland (writer), Arthur Erickson (architect), Jack Shadbolt (painter), Emily Carr (painter), Fred Herzog (photographer), Eric Metcalfe (painter), Jerry Pethick (artist), Joe Average (artist), Attila Richard Lukacs (painter), Veda Hille (musician), The New Pornographers (band), Dan Mangan (musician), David Newberry (musician), Etienne Zack (painter), The Carnival Band (marching band), others

Photo by Fred Herzog, 1958.

27. Character; Grit
“The tawdriness of the PNE, Hastings Racecourse, and the Pacific Coliseum.”
“The rough-and-tumble nature of the old port city/resource town.”

28. Nostalgia/Eccentricity/Quirkiness
“An interesting subculture; a renewed hope that the eccentricity of Vancouver continues.”
“I miss the older couple that used to have a Museum of the World on Main St. Anyone remember them? They didn’t have kids, the said, but spent the money on traveling; and when they were older hung pictures of all their adventures and invited the world to come visit them. You’d go in and get tea and a cookie and just walk around looking at their collection.”
“The quirkiness of a significant number of the residents.”
“Anybody remember the lady who used to walk her dressed up goose in a baby-carriage around Granville?”

Time Top, by Jerry Pethick

29. The Potential
“The still-evolving nature of the city. Its lack of establishment.”

Thanks thus far to the following commenters, whose suggestions were incorporated, disguised, and/or ignored: Nemesis, terminalcitygirl, Renters Revenge, pretzels, jesse, BLM, rp1, Absinthe, RE Lurker, chubster, Aldus Huxtable, Paul Streppel, Froogle Scott, epte.


“How bad do you REALLY want a house in Vancouver? Part of being an adult is making sacrifices.”

The following comments found below the article ‘Would-be homebuyers shocked at Vancouver prices’ [ 12 Mar 2012] that deals with a local couple with $315K to spend seeking a 2 bedroom condo somewhere in Vancouver:

“I read the comments here [at] and it reminds me of what everyone was saying 20 years ago…it’s too expensive, nobody can afford it…
20 years ago we bought in E Van for 300 grand, at 12 percent interest! That was a mortgage of 2700 a month. The same money today pays easily 600,000.
Give up all the crap you don’t need like car payments, vacations, fancy restaurants, fancy clothes, electronic this and thats and you’ll have the money.
It’s just a matter of priorities. How bad do you REALLY want a house in Vancouver?”

– kdrkim, 13 Mar 2012 12:44pm

“No sympathy here. Part of being an adult is making sacrifices. Everything you want isn’t always in your budget so you have to decide what is truly important to you and go after those things rather than sitting there complaining about how it’s someone else’s fault.”
– nsrv726, 13 Mar 2012 12:46pm

“I would like to be able to have this in East Van? Is that too much to ask?”
“Yes, that is too much to ask.
You want a Mercedes at a Chevy price. And yes, that is too much to ask.”

– CBCFanzine, 13 Mar 2012 9:28pm

“I think it’s unfair the cost of Ferraris are out of my reach. It’s not fair that I have to settle for a Honda.”
– ClosetIguana, 13 Mar 2012 8:18pm

“According to the graph he is making considerably less than the median income and he wants to live buy a place in downtown Vancouver or East Vancouver so he can be ‘be close to his friends’.
He thinks like a 12 year old haha.”

– cbcbcc, 13 Mar 2012 6:36pm

“Buddy has a choice to make: get a job that pays more money or move to a community he can afford. So tired of these whiners. Why does CBC put these ‘entitled’ people on the air? This guy is no victim.”
– jawardwinner, 13 Mar 2012 2:30pm

These comments headlined here for their common theme, that of “Those who complain about high housing prices in Vancouver simply have unrealistic expectations”.
The statement is disarming; it makes those who point to the housing bubble seem like spoiled children, they stand accused of being “entitled”.
This is convenient for those who seek a continuation of the status quo. The implication is that folks should stop being critical and get with the program (and prop up the market). The proponents often encourage prospective buyers to “work harder” but, of course, what they really mean is “borrow more”. Housing prices in Vancouver are most definitely not driven by earnings, they are driven by high leveraged borrowing.
Bubbles, by their very nature, overtly and covertly ‘conspire’ to perpetuate themselves; it’s hard to criticize them when they’re underway without looking superficially like a partypooper or a whiney brat.
– vreaa

“When I look at the actions of governments, I cannot figure out whether they are mostly stupid or mostly dishonest.”

“For most of us, housing is our biggest expense. One out of every five dollars we earn goes to build, buy, rent and run our homes. Facing high home prices, large personal debts, and an uncertain economy, fewer Canadians can buy a new home today than in the past, and they are choosing to rent instead.
Unfortunately, in many cities finding an affordable place to rent is nearly impossible. The most immediate problem is supply. Vacancy rates under 3 per cent push rents up. In Vancouver and the Greater Toronto Area, it’s 1.4 per cent.
Vacancy rates this low force our young people to move out of the city, threaten seniors on fixed incomes, and have a negative impact on local businesses.
That’s why this spring’s federal budget must put Canada’s rental housing market on solid ground, by pursuing low-cost, high-leverage policies that get jobs on the ground and build housing Canadians can afford.
Building and renovating rental housing will give cash-strapped Canadians more affordable housing options at a time when they’re being increasingly priced out. It will also create thousands of construction jobs to replace the 50,000 lost to slower new housing starts.
We’re calling on the federal government to use its spring budget to introduce cost-effective market incentives to encourage private-sector investment in rental housing.
These include:
• Low-interest loans underwritten by the Canada Mortgage and Housing Corporation (CMHC) to finance new rental construction.
• Tax reform to encourage owners to renovate and retain rental properties, providing an incentive to preserve affordable rental housing.
• Help for landlords to make rental housing more energy efficient, reducing costs and easing pressure on rents.”

Gregor Robertson, Mayor of Vancouver, in an article co-authored with Joe Fontana (Mayor of London, Ontario) in the Toronto Star, 7 Mar 2012

This from the discussion at 12 Mar 2012:

“Why build apartments when developers can make quick and obscene profits on shabbily built condos and walk away even before the expiration of their faux warranties?
The only thing that will truly encourage construction of rental stock is a return to sanity in housing prices.”

– chilled, 12 Mar 2012 10:30am

“…“they” will start building affordable, quality rentals when people stop buying high-priced, crappy condos.
The construction industry is simply doing what makes them the most money. If you want someone to blame, blame the buyers and the governments which enable them.”

– patriotz, 12 Mar 2012 5:02pm

“Right, like the current government that decided to give ten grand to people buying a first home, which is to say, they decided to give ten grand to any developer who sells to a first time buyer, which is to say that they arranged for it so that rentals would have to bring in ten grand more to be competitive with sales. As often happens when I look at the actions of governments, I cannot figure out whether they are mostly stupid or mostly dishonest.”
– N, 12 Mar 2012 5:45pm

By the way: A plan for “tax reform to encourage owners to renovate and retain rental properties” means that tax-payers will be subsidizing landlords; this will apply even more government-backed upward-pressure on housing prices in Vancouver.
Governments can really make a hash of markets. Case in point: the CMHC itself was created with the idea of making housing affordable; by mis-pricing the risk of lending, they have supported a speculative mania in housing and made housing less affordable.
Frequent readers know our position very well:
No government can design a solution for Vancouver’s dilemma; we are trapped in a monstrous speculative mania, there is no way through but price collapse.
Government policies may precipitate the collapse, or they may give cocaine to the dying racehorse and let it limp along for a while longer (drawing in even more buyers for the slaughter), but, whatever a government does will not put off the inevitable outcome of a bubble.
– vreaa

‘Frontier Centre’ Opinion – “High home prices can only be solved from the supply side. Open portions of the Agricultural Land Reserve, but only to high density development.”

“Vancouver is in desperate need of new solutions to ease its worsening housing affordability crisis. The 8th annual Demographia housing affordability survey released by the Frontier Centre found that Vancouver has the second least affordable housing market next to Hong Kong. On average, and assuming zero interest, a house in Vancouver would cost the median family more than ten years income. Three years is the threshold after which a market is considered unaffordable.
Mayor Robertson recently announced the launch of a new task force to tackle the housing affordability crisis. The only way to tackle this problem is to focus on getting more housing units on to the market.
Much of the debate around housing affordability descends into discussions about manipulating housing prices by freezing out market mechanisms.”

“In order to balance the concerns of housing affordability and urban sprawl, the city of Vancouver should strike a compromise: open portions of the ALR, but only to high density development. This may not be the optimum solution for families that would prefer to purchase single dwelling homes, but a significant influx of new units would be a countervailing force against runaway home prices. This would also put downwards pressure on housing in the rest of Greater Vancouver. Though opening up broad swaths of the ALR may be the ideal, this seems like a reasonable compromise.
This type of solution would rile people on both sides of the political spectrum, but it would be a dramatic improvement over the status quo. High home prices can only be solved from the supply side. The choice between maintaining the ALR as constituted or opening up portions should be obvious. Infill development can only go so far towards solving Vancouver’s housing crisis.”

– from ‘Time for Real Solutions to Vancouver’s Housing Affordability Crisis’, by Steve Lafleur, New Geography, 9 Mar 2012. Lafleur is a Policy Analyst with the Frontier Centre for Public Policy.

Assuming that “high home prices can only be solved from the supply side” leads most looking for a solution to consider ways of building new supply, and Lefleur offers a version of such a plan. But we note that, like almost every other commentator wrestling with Vancouver housing affordability, he leaves out the most obvious and necessary next step – an implosion of the bubble.
When the mania ends and prices begin their long descent, supply will come from what we’ve referred to as ‘speculative holders’ – not just the obvious flippers and developers, but all Vancouver owners who have been holding property because prices are rising. Most don’t even see themselves as speculators, but they are just that. And, when prices start their relentless decline, their reason for holding will evaporate and they will come to market. There will be lots and lots of supply, without any need to actually create more product. Seems counter-intuitive, but, there it is.
Vancouver will still have sore need for a sensible housing policy thereafter, but the milieu in which it will have to be made will be very different from that which faces us today.
– vreaa

‘Canadian Business’ Headline – “Prediction: The Canadian housing market will crash”

(graphic used by ‘Canadian Business’ to illustrate this story)

“The average price for Canadian homes sold in November stood at $360,396, according to the Canadian Real Estate Association. Meaning that in just 10 years, prices have doubled.” …
“Optimists may find comfort in the market’s resilience. In fact, a December press release from Re/Max boasts of a residential real estate market that “defied conventional logic and exceeded expectations in 2011.” But why should we take comfort in a market that defies logic? That is one of the key elements of a financial bubble.” …
“There is little argument among economists that houses in most major Canadian markets are, at the very least, overvalued. By some metrics, houses are less affordable now than at any point over the past 30 years. Rising prices draw people to the market in part because they’re afraid they will eventually be shut out. But what many fail to consider is that when ordinary Canadians are unable to afford real estate—even when borrowing at unusually low interest rates—the market will adjust. Unless our incomes go up, house prices have to come down. And there is a very good chance this will happen in 2012.” …
“Both the U.S. and the U.K. have already suffered crashes north of 20%. While different factors underlie their real estate markets, it nevertheless stretches credibility to believe that Canada will remain an anomaly.” …
“The heads of three of the country’s major banks (CIBC, RBC and BMO) expressed concern about the housing market at an investor conference this month. All agreed that increasing housing supply and growing debt means the market is reaching its peak. While they don’t foresee a crash, they acknowledged prices are likely to drift downward. Bank of America Merrill Lynch, meanwhile, predicts prices could fall between 5% and 10% this year. There is also a possibility prices will drop much farther over the next few years, perhaps as far as 25%. The scary part is that the direction of the economy ultimately might not even matter. If interest rates rise and the monthly cost of carrying a mortgage edges up, there’s little doubt that prices will fall, as rising rates make homes less affordable. But interest rates don’t have to rise for the boom to come to an end.”

“David Madani, an economist with Capital Economics, says that the reason prices keep rising, despite fundamentals that indicate they should be moderating, is because a bubble mentality is driving the Canadian market. “It’s this belief that prices are going to continue to go up, which becomes a self-perpetuating force,” he says. He explains that in good times, rising prices create a sense of urgency among home buyers who don’t want to miss out on the chance to benefit from soaring prices. So people pile in, pushing prices higher. This creates the appearance that housing is an asset that can only rise in value, and even more pile in.
But this line of thinking can reverse, and people can overreact to a declining market too. The greed that previously drove buying behaviour turns into fear that prices will fall indefinitely. This can be a self-perpetuating force. The result is that prices can dip farther than where economic fundamentals suggest they should be.”

“An argument sometimes used to defend the strength of the housing market is that foreign investors, predominantly wealthy Chinese citizens, are buying property here because Canada is a safe haven in a turbulent global economy. There are no actual data to support this claim, however. Even assuming it’s true, the presence of financially motivated buyers helping to prop up the market doesn’t inspire confidence. “They’ll just liquidate their positions,” Madani says. “They’re a much greater flight risk.” Any listings they dump on the market will only serve to drive prices down further.”
“When prices do start to fall, don’t expect a quick rebound like we saw three years ago. The average home price fell by 8.5% between August 2008 and March 2009, according to the Teranet-National Bank House Price Index, in a decline sparked by the financial crisis. By November, the market had already recovered. Part of the reason for the quick rebound was massive government intervention.” …
“That doesn’t mean that those considering buying a house today should necessarily let the prospect of a correction deter them. A house is firstly a place to live, not an investment. Bubbles occur, in part, because we forget that distinction. So buyers need to be comfortable knowing their houses might not increase in value over the next few years—and also that they could be worth much less.”
– excerpts from ‘Prediction: The Canadian housing market will crash’, Canadian Business, 12 Jan 2012

Exactly what the bears have been saying for years now; it is noteworthy that this argument is now being laid out by the MSM. All of these mainstream articles ‘prime the psyche pumps’, in that all market participants likely now know of the bubble ‘theory’. Once price action confirms their fears, buyers will freeze and sellers will rush to market. Just watch.
We agree with pretty much every word in the article, except for:
1. “That doesn’t mean that those considering buying a house today should necessarily let the prospect of a correction deter them.” [Of course it should deter them, unless they enjoy giving away money and hobbling their own financial future well-being. They can simply wait, and then later buy the same house for less money, or a lot more house for the same money.]
2. “There is also a possibility prices will drop much farther over the next few years, perhaps as far as 25%.” [For parts of Canada, perhaps, but these predictions are way too optimistic for the Vancouver market. Prices here will drop 50%-66%, and in some BC recreation areas as much as 80%, peak to trough.]
– vreaa

“I Married A Renter” [Visual Anecdote]

Earthquake; BC Job Losses; Richmond Dropping; ‘Bubble’ Mentioned In ‘The Province’

A 6.7 Richter earthquake occurred off the west coast of Vancouver Island today at 12:41pm, felt in Vancouver. Buildings swayed “from Fraser Valley to Campbell River.”
“I was watching the U.S. Open Tennis downstairs and while sitting on my couch I felt it beginning to move back and forth…. It didn’t frighten me… but it took my attention off the tennis match for a few minutes.” [David Dickinson, Courtney]

CBC News, 9 Sept 2011

12,000 Jobs lost in BC last month.
News 1130, 9 Sep 2011

The Richmond RE market has very definitely softened year over year:
#Sales: 2011-8 (2010-8) : % Change
Detached : 95 (124) : -23%
Attached : 69 (84) : -17%
Apartments: 96 (127) : -24%
New Listings 2011-8 (2010-8) : % Change
Detached : 251 (165) : +52%
Attached : 165 (125) : +32%
Apartments: 244 (205) : +19%

– via VMD, 9 Sep 2011

‘The Province’ quoted David Madani’s ongoing sensible (but conservative) prediction of a Canadian housing price correction of 25%.
The Province, 9 Sep 2011

“The main Wiggles guy asked the kids and the crowd to name something special and unique about Vancouver.”

“I was at the live Wiggles show the other day. The main Wiggles guy asked the kids and the crowd to name one thing/something special and unique about Vancouver.
Awkward confused look on people’s faces.
Someone said “maple syrup”..or “sushi”(??)…until everyone seemed to agree on “Olympics”
Come to think of it, I cannot think of anything either..”

Get Real at 11 Aug 2011 11:12pm

Damn! This would have been the cutest story if one of the kids had called out something about the housing market. – vreaa

On that note, this extract from ‘Summer Fun For Boys’, by Tim Long, New Yorker, 1 Aug 2011:
“At the beach, build the biggest sandcastle anyone’s ever seen. Pretend that it’s 2005, and take out a huge, adjustable-rate mortgage on the sandcastle which you can’t really afford. Throw lavish sandcastle parties for seashells, rocks, plastic shovels, and candy wrappers. When the bank comes to foreclose on your castle, run and find your dad. Try not to look surprised when you discover him sitting with a lady in a green swimsuit. Her name is Terri. While shaking Terri’s hand, ask her for a seven-hundred-thousand-dollar loan to cover your sandcastle debts.”

“I made the move when the market was sleeping. I own my home free and clear. It’s taken a long time, but I do know where I came from and how I got here.”

This from craigslist: ‘British Properties (North Shore)’, 2011-06-20, 8:02AM PDT [hat-tip ‘B’] –
“I’ve been here [in the British properties] for 30 years…. I used to live in Langley, but after high school I worked at a garage repairing cars and pumping gas. I saved a little, opened up a semi-successful firm of my own, went bankrupt through no fault but my own, happened to start-up again, scrimping and saving all the while raising two children (one of whom passed away rather early) and made the move when the market was sleeping. I own my home free and clear. It’s taken a long time, but I do know where I came from and how I got here. Sure it’s just a modest house with a fairly nice view.
So [for some to say] that the Chinese are taking over British Properties without ever living here, really pisses me off. But hey, you’re entitled to your opinion. Just take it from someone who actually lives up here. And know, I’m not some twisted rich snob who looks down on the rest of you, I’m just a regular guy who happend to one day find himself living somewhere else. I’ve earned it. So has anyone who owns their own home, be that on the North Shore, in Langley, Surrey, Coquitlam or Delta.
And by the way, I’m a second generation Canadian. And proud of it.”

Aftermath – Vancouver Riots 2011


The legacy of the ‘Stanley Cup Finals and Vancouver Riots of 2011’ may well end up being the ensuing social debate. We’ll here collect links to representative opinions, and other articles of interest. [This post will be updated with further readings; Please post suggested links, quotes or subjects in the comments. -ed. ]

Theories of Causation (not mutually exclusive):

1. “Criminals, anarchists and thugs”
– Police Chief; Mayor (Globe and Mail, Van.Sun)
– No, not anarchists (Brian Hutchinson, NatPost)

2. Widespread Deep-Seated Societal Problems
Adrian Mack and Miranda Nelson, Georgia Straight

3. ‘Disenfranchisement/Disinvestment/Powerlessness’
Froogle Scott

4. Sport Fan Riot/’Fun’/’Exciting’
“Forget Freud, Forget Marx. Rioting, above all, is fun.” – Andrew Potter, Macleans
Douglas Todd, Vancouver Sun

5. Bad Parenting

6. Mob Mentality/Madness of Crowds
Chronicle Herald

7. Poor Planning by Authorities
Calgary Herald

8. The Inherent Violence of Hockey Itself

9. Other?

Other subjects of interest:

Concerns About The City’s Reputation
“.. a huge black eye for the city of Vancouver” – James O’Brien, online hockey writer, NBC Sports

Comparison with the Olympics:
– Different
– Not So Different: Christie Blatchford

Comparison with G20 T.O.
– Different: Toronto Standard

City preparation
VPD response, Globe and Mail.
Police Chief acknowledged mistakes, 17 Jun 2011, Nat.Post
“Mayor Gregor Robertson was a little naive. He wanted these live events. He wanted a great big fun city.” – Leo Knight, former Vancouver city cop and RCMP, chief operating officer Palladin Security.
Debating the blame, 21 Jun 2011, G&M

The Effect of Social Media
Globe and Mail, ParsonsBlog
– “…the massive online reaction to the Vancouver riots is unprecedented and as groundbreaking as WikiLeaks.” – Christopher Schneider, a UBC sociologist

Public Outings of Rioters
– various websites: ‘Vancouver 2011 Riot Criminal List’; publicshamingeternus

“For reasons I can’t really explain, I went from being a spectator to becoming part of the mob mentality that swept through many members of the crowd.”Nathan Kotylak (pictured above)

“A UBC student photographed leaving Black & Lee Tuxedos with a piece of clothing in her hands has been called out online by one UBC donor, who is threatening to pull his annual donation if she isn’t expelled.” – Vancouver Sun, 19 Jun 2011

“Alex Prochazka, 20, a professional mountain biker, was photographed during the riots with a T-shirt emblazoned with the name of a sponsor. He has since lost multiple sponsorship deals and told The Sun, “I didn’t go there for the riot, I went for the hockey game and got caught up in the hysteria of it afterwards.”Vancouver Sun, 20 Jun 2011

Self Confessions
– Semi-Voluntary: G&M
– Unintentional: news957

Proclaimed Heroes
example1; example2; others

Backlash Against Social Media and Public Outings
“The online forums have gotten pretty ugly. It enables a whole dark side of our psyche to go public … it’s too bad and I hope it turns around quickly.” – Mayor Gregor Robertson
“I don’t think we want to live in a society that turns social media into a form of crowdsourced surveillance.” – Alexandra Samuel, Harvard Business Review

The Iconic Kissing-Couple
yahoo, cbc

The Clean-Up
Georgia Straight

The “Citizens’ Wall”

Healing? Penance? Purification? Blaming?
“Mayor Gregor Robertson says the city has been in touch with merchants and asked them not to throw the plywood away, while archival staff consider ways to save what he calls “these pieces of history.” – G&M 19 Jun 2011 [This just 4 days after the riots themselves. An attempt to instantly manufacture a palatable history. -ed.]

Notice How Nobody Is Talking About The Hockey Result
“I would like to congratulate the Boston Bruins on a game well played for the Stanley Cup.” – local Canuck fan
‘Ballad of Brock Anton’

‘You Gotta Be Here’

Vancouver Riots

The Froogle Scott Chronicles: Mortgaging Our Souls In Paradise – Part 9c: So You Want to Buy a House and Fix It Up? Thirty Suggestions for Survival

Part 9c: So You Want to Buy a House and Fix It Up? Thirty Suggestions for Survival

[30 suggestions over 10 sub parts, starting with Part 9a. -ed.]

8. Water — the enemy

Remember this mantra: Water is a house’s worst enemy. — Tom Silva, This Old House

Vancouver was carved out of a temperate rainforest. The forest is gone, but the rain is still here. It’s what keeps everything green and allows the remaining trees to grow large, but it also represents a constant assault on the integrity of houses. The frequency and duration of rain in Vancouver is the real problem for houses and wood-frame condos, rather than the total amount of rainfall. Instead of intermittent cloudbursts that dump a lot of water in a short time before the sun reappears, drying out everything, rain in Vancouver tends to be an all-day or all-week affair. Drizzly, misty, fine rain alternating with overcast skies means that buildings can stay damp for long periods of time, which coupled with mild temperatures is exactly what promotes mould growth and rot.

One way of looking at a house is as a water-resisting structure, or perhaps more accurately, a water-management system. Most of us would think first about the roof, but in some ways roofs aren’t the main problem. They’re specifically designed to resist and shed water, and if properly built and maintained, do their job well. Problems that do arise tend to be with roof penetrations for vents, chimneys, or skylights, and improperly installed or poorly maintained flashing and caulking. But everything’s exposed, so finding and fixing problems is usually straightforward.

If you’re buying a house, one thing to be cautious about is a roof with insufficient overhang — the part of the roof that extends beyond the house wall. Overhangs are important because they prevent water from rain and roof runoff saturating house walls and potentially working its way into the house. Deep overhangs are best. Anything less than a foot won’t be that effective, and even a foot isn’t that much. A roof with little or no overhang may once have had one, but poor maintenance of the roof allowed the edges to rot, and instead of repairing the damage, someone doing a quick roofing job just buzzed away the rot with a saw and re-roofed what was left. Be cautious about buying a house with a compromised or missing roof overhang. In subsequent years water may have penetrated the walls, and rot may have spread through the sheathing and framing. At the very least, rebuilding a roof overhang should be one of the first things you do.

Less straightforward are problems associated with water penetration through walls, through concrete foundations, and around windows and doors — the elements that along with the roof make up the building envelope. One of the veteran house builders who worked on our reno maintained that flawed building envelope design was at the root of the leaky condo crisis. A number of years ago, the BC building code and the Vancouver building by-law were amended to require that all new construction incorporate a vapour barrier on the inside of exterior walls — typically a layer of heavy poly between the drywall and the studs and insulation. The idea was to improve heat retention and energy efficiency, and protect the cavities of exterior walls from condensation, by preventing water vapour from warm interiors meeting cold exterior air inside the wall. However, no change was made to the code regarding the outside of exterior walls. A typical assembly remained wood siding or stucco over a single layer of black building paper over plywood or OSB sheathing. The result was that any water that made its way into a wall from outside, because of a leak, or wind-driven rain, or was present in the wall framing materials during the construction process, now became trapped behind the vapour barrier. Walls could no longer dry to the inside, and given the Vancouver climate, drying to the outside might not happen for days at a time. The veteran builder likened the results to “leaving wet salad in a polythene bag.” It’s why the exterior walls of thirty-year-old condos might be rotting, whereas wood-frame apartment buildings built in the 1940s or 1950s, or hundred-year-old houses, with plenty of air movement through walls that can dry to both the inside and the outside, might be virtually rot-free. (Although being dry because of draftiness isn’t really a solution.)

Once government and industry realized the problem, they came up with the response: the rainscreen, the missing half of the wall assembly equation. A rainscreen is a drainage and air drying layer immediately beneath the exterior siding that cuts off the passageway for water, and drains any buildup to ground. Drainage mat against concrete foundation walls is another development that serves the same purpose — cut off the seepage of water through the foundation and move it to ground. Several other factors contributed to condos rotting in coastal BC, including California-style architecture (flat roofs, no roof overhangs, architectural adornment) inappropriate for the climate. And I’ve omitted some of the more esoteric building science details, because I don’t yet fully understand them. However, sealing up the inside of exterior walls without considering the outside was probably the most egregious of various design issues.

If you’re house hunting, be alert for signs that water is causing problems for a structure. Check the exterior closely for spongy-looking areas, flaking or bubbling paint, or crumbling stucco. Understand that vinyl siding may be have been installed over the original wood or stucco siding, covering up evidence of rot. In preparation for a sale, a house may have been freshly painted, hiding signs of water incursion. Inside, look for water staining on walls, dark, discoloured bottom corners, and tiny black dots of mould. Again, take into consideration a recent paint job. Pay special attention to the basement or lowest level of the house. Spend lots of time there. Breathe in deeply while walking throughout. Does it smell musty or damp? Trust your nose. Put your hands on the walls, especially below the foundation line, where drywall may cover concrete. Does the drywall feel firm and dry, or damp with a hint of softness? If the basement is unfinished, look for white powdery marks on the concrete. This is efflorescence, the salts left from water that has seeped through the foundation and evaporated. It’s not critical if you intend to leave a basement unfinished, but a problem if you intend to finish a basement, potentially trapping moisture that had previously been able to evaporate. If possible, tour a house during a rainy period, when any signs of water incursion are likely to be most noticeable. One of the reasons the peak house selling season is during the months of good weather is that the various symptoms associated with a leaky building envelope are going to be much less noticeable. Lastly, make sure that as part of a thorough home inspection, the inspector goes over the house with a moisture meter.

If it becomes apparent that a house has been losing the battle with water? Flee.

[Further resources/reading, general]

“Weathering the storm”, The Vancouver Courier, no date.

[Further resources/reading, advanced]

“Understanding Vapor Barriers”. Building Science Corporation, 24 Oct, 2006.

9. Find a good home inspector

While learning the basics about a house’s systems is a good idea for any home buyer or homeowner, most people don’t have the time or the inclination to truly delve into the hundreds of details that these systems represent. And even if you do learn a lot from books, or other sources, it’s not the same as years of experience gained scrutinizing the inner workings of hundreds of houses. For that kind of expertise you need a good home inspector, or some other kind of knowledgeable construction industry professional.

During the height of the bidding war frenzy that gripped the Vancouver real estate market in the mid 2000s (with sporadic outbreaks ongoing), it was common to hear of people putting in over-asking offers without any subjects. In a more normal market, a typical subject would be the requirement of passing a home inspection. Incredibly, during this abnormal market, formulating a competitive bid might require that you waive the right to look closely at the most expensive thing you were ever likely to buy. Step in to a massive financial commitment, and do it blind. Foregoing a home inspection is risky behaviour, to put it mildly. It’s rolling the dice, with ten of thousands of dollars, or more, potentially riding on the outcome. In the subsequent years, some of these buyers will have discovered they’ve been burned. Basement walls full of mould, foundations crumbling, whole sections of house frame or roofs rotted out, failing building envelopes, plumbing and wiring systems at the end of their lives, plugged or non-existent drainage, even major structural deficiencies associated with unpermitted work. Big dollars to fix, and after spending those dollars, the house still looks the same on the surface. The stove is still harvest gold, the toilet’s still blue (which may be cool, depending on your aesthetic, but doesn’t do much for resale value), and 1970s paneling still prevails. You don’t feel any closer to achieving your vision for the house, but a big chunk of your budget is already spent. A good home inspection can save you a lot of grief by alerting you to expensive liabilities in advance, allowing you to make a more informed purchase decision, or avoid some purchases altogether.

Unfortunately, the story that’s been emerging in the last couple of years is that there are a lot of incompetent or even unethical inspectors operating. In Ontario, what regulation there has been of inspectors is toothless. British Columbia has only recently started qualifying and licensing inspectors (as of 31 March 2009), which means that previously anyone could hang out their shingle and call themselves a home inspector. And the barrier to entry may still not be that high.

Generally speaking, you shouldn’t use an inspector recommended by a realtor. Either the listing realtor, or the buyer’s realtor. Realtors on both ends of a sale only make money when they close a deal. Deals get closed when subjects such as home inspections are removed from offers to purchase. Home inspectors who find lots of problems with houses are themselves a problem for realtors who want to close deals and get paid their commission. As a buyer, if the problems are legitimate, those are the inspectors you want. Some realtors may be inclined to recommend a ‘realtor-friendly’ inspector with a reputation for passing houses that another inspector might fail. You need to ask yourself which inspector is likely to best serve your interests.

That said, when I asked a realtor during our house hunting in 2003 about a well-known local home inspector, he was scathing. In this realtor’s opinion, this inspector manufactured reasons for failing houses in order to generate additional business for himself. According to the realtor, he’d fail two or three houses, collecting his inspection fee on each one, before finally passing a house for a client.

As well, realtors who are interested in repeat business, good word of mouth, or surviving as realtors once a real estate boom has run its course, know better than to make a quick and easy sale by foisting a piece of junk on an unsuspecting buyer. You need to know whether the realtor you’re dealing with is ethical, or a quick-buck artist who’ll be closing up shop once the easy money is gone.

It’s hard to know where the truth lies. Do your homework. The time and effort required to find a competent, ethical home inspector is time and effort very well spent. And do it early, well in advance of any offer to purchase. Rushing to find an inspector while the clock is ticking on an offer makes it less likely you’ll find a good one.

[Further resources/reading]

Inspecting a House: A Guide for Buyers, Owners, and Renovators
, by Alan Carson and Robert Dunlop. Toronto: Stoddart, 1999.

The Holmes Inspection: Everything You Need to Know before You Buy or Sell your Home, by Mike Holmes. Toronto: Collins, 2008.

“Think you’re safe from problems when you buy a new home? Think again”, CBC Marketplace, 9 Jan, 2009
“Can you trust your home inspector?”, CBC Marketplace, 8 Jan, 2010

“Homeowners out thousands despite warranty”, CBC News, 16 Nov, 2010.

Coming soon: Part 9d: So You Want to Buy a House and Fix It Up? Thirty Suggestions for Survival – Suggestions 10 – 13.
Part 9 subsections are posted every Tuesday and Friday.
Read them all before you dig up the foundations. -ed.

“In Vancouver, I can’t afford to buy in an area where I would actually WANT to live. Guess what? There are lots of other highly desirable places to live, especially on the west coast of North America.”

HomelessinSD at REtalks 14 Apr 2011 1:02pm“I couldn’t afford the Dunbar home 7 years ago and I can’t afford the Dunbar home now. You can’t buy what you don’t have money for… [In 2004], I was a few months away from getting married and my future wife was homesick.
At the time, I was working in southern California and would only consider moving back to Vancouver if the situation was right (like having a chance to own a home in a good neighborhood). I saved lots of money from 2004 and I bought in San Francisco in 2007 and we are quite happy here. I’m not bitter about not owning in Vancouver and I have absolutely no desire to live anywhere east of Main – there are better options elsewhere in the lower mainland.
So, it’s 7 years later and I like Vancouver considerably less than I did in 2004 – to the point where it’s likely I’ll never move back. You might argue that I won’t move back because I can’t afford to. That’s partially true: While I could purchase a shit-shack on the east side, I can’t afford to buy in an area where I would actually WANT to live in Vancouver. Guess what? There are lots of other places to live, especially on the west coast of North America that are highly desirable.
Homes tripling in value in 7 years is not healthy or sustainable.”

Australian Housing Market Strikes Out; Canada Is Last Batter Up

From 13 Apr 2011“We have a very overvalued housing market and even a small adverse shock can be magnified by a large adverse impact on property values,” said Gerard Minack, Sydney-based global developed markets strategist at Morgan Stanley, who asserts Australian home prices are as much as 40 percent overvalued. “We’re seeing that now in parts of Queensland.”
Australia’s housing is the most overvalued in the world, the Economist newspaper said last month. The country had the most unaffordable homes among English-speaking nations, with the Gold Coast and Sunshine Coast markets near the top, according to a Jan. 24 report by Belleville, Illinois-based consulting company Demographia, which compared 325 housing markets in seven developed economies.”

Guess who was second to Sydney in the ‘Severely Unaffordable Housing Markets’ category of the Demographia study? Yeah, your home team, Vancouver.
Canada and Australia have been moving lock-step: Resource based economies, strong dollars, and housing bubbles with off-shore buyers. We expect Canada to follow Australia with respect to RE weakness. This could herald the beginning of our crash. -vreaa

The Aussie RE turn is also covered in recent posts at Mish’s ‘Global Economic Trend Analysis’, ‘Australian Home Sales Sink, Luxury Units Sell for Half Cost; New Home Loans at 10-Year Low; Australia Retailers in Deep Trouble; Party Officially Over’, 10 Apr 2011

Seattle RE – Down 30% From 2007 Peak; Back To Sept 2004 Prices; Still Dropping

Down 29.6% since 2007 peak; prices back to Sept 2004 levels.
[from, hat-tip Don]

Our run up has been greater and our fall will be greater. – vreaa

Japan Struck By 8.9 Earthquake And Tsunami

“The unit is up for sale once again, and yesterday they reduced it down to the same price they bought it for 5 years ago. They cannot afford to reduce it anymore.”

Anonymous at February 18th, 2011 at 9:34 am – “I was talking to a friend last night and he mentioned they’re trying to sell their Coquitlam condo – they’re out of room and want to have another kid. They bought 5 years ago and have tried selling it two times last year with no luck. The unit is up for sale once again, and yesterday they reduced it down to the same price they bought it for 5 years ago. They cannot afford to reduce it anymore, so if they cannot sell they’ve come to the realization that they’re basically trapped – potentially for 5+ years depending on where the market goes.

jesse at February 18th, 2011 at 11:16 am“A relative of mine bought a DT unit on presale and sold it mid-2010 for the same price they paid after fees, with no depreciation (sold within 4 months of completion). The presale contract was signed in about 2007. Some specific Coquitlam stuff, being more on the periphery, may now be 2006 break-even. Not sure if it’s representative of the entire market but I’m not surprised some people are finding it challenging selling at a capital gain.”

Disillusion Row, Numbers 1-12

All of the following  anecdotes are from a single recent thread at They are archived here as a record of some of the sentiment being expressed at this juncture. Our housing bubble is at the very least profoundly distracting. Worse, it is scaring away human capital and putting our local economy at risk of implosion. -vreaa

1. JordanClark January 24th, 2011 at 3:56 am
“This market is insane, the longer it goes on the worse off everyone here will be in the long run. The prices just flat out don’t make sense, there is no justification and people need to realize huge debt comes with real risks. People who got in at the right time might be better off but they do so to the detriment of the younger generations, who will be relied on to pick up the economic torch some day. What will happen when they aren’t there or still up to their eye balls in debt? We’ve been waiting for years and have pretty much given up on greater Vancouver. The market here will collapse some day, but that whole process will probably take many more years, people here are extremely stubborn about the eternal value of real estate and will take nothing before reducing prices. My kids start school this year, we need to be in a home with a yard, and stability. The condo life sucks. Luckily I’m a dual citizen so I’m in the process of sponsoring my wife and moving down to Washington State. I wish this was an easier option for more Canadians/Vancouverites because I think it would offer great relief to so many other families. We’ll buy a nice 3-4 year old house, 4-5 bedrooms, 2500+ sqft, nice 8000+ sqft yard, on a nice cul-de-sac within a few blocks of school for maybe $300k. From saving all these years we can put 50-75% down, pay it off in 10-15 years while still making significant retirement contributions. I’ll be able to retire in my 40s. Adios Vancouver.”

2. Vancouverite January 24th, 2011 at 7:03 am
“Count me among those who have had enough. I was born and raised in Vancouver. I am at the very top of my very high earning profession here, like my husband. We own a SFH on the west side (it is respectable by Vancouver standards but pretty modest by the standards of any other city) and we are almost mortgage-free. While we would like to buy a bigger house since our kids are getting older, we won’t. This bubble is certain to burst sooner or later and we work way too hard to throw our money away competing with buyers who are up to their ears in temporarily cheap debt. We know how long it takes to save $100K. Although our extended families are here, we are actually giving serious thought to moving elsewhere in Canada or even to another country. We could sell our house today and buy a nicer house in a nicer neighborhood mortgage-free, with lots of cash left over for savings. There would be some initial sacrifice professionally, but we’d probably earn more in the long run. Even if we didn’t, we don’t really care if it means a better life for our kids. Which brings me to my biggest concern, Vancouver’s future. There is almost no significant business left here that is not connected to real estate in some way. Why would you bother trying to make a better widget when you could make more money more easily by developing, constructing, or marketing $1m townhouses? Even if you wanted to make a better widget, why would you do it in Vancouver, where it is difficult to attract professional talent because of the exorbitant cost of living? When this real estate bubble collapses, and it will, I think it is going to be disastrous for this city, which has put all its eggs and then some into one basket, and for its people, many of whom depend upon rising home equity for their spending and have forgotten what actual work and business looks like. I think I might like my family to be somewhere else.”

3. LY January 24th, 2011 at 7:12 am
“I rented for 5 years in Richmond waiting for house prices to correct. Everytime its about to go down, the gov’t will intervene. As long as mortgage terms in Canada are lax and rich immigrant’s money continue to flow in, I don’t see any sizable correction in housing prices especially in bubbly vancouver. I gave up on Vancouver, move to Toronto and bought a house. Adios Vancouver too.”

4. pricedoutfornow January 24th, 2011 at 9:04 am
“How has RE affected me? Well, for one, I have a whole pile of cash that could potentially be used for a healthy downpayment, if prices were what they were in 2001. If I were to drop that on a downpayment today, it wouldn’t get me very far. Plus the cost of carrying the mortgage would make my living costs go up by over $1000 a month (more when interest rates rise!). For another thing, every family gathering with my SO ends with questions from the inlaws as to why I haven’t bought yet, why am I throwing money away on rent. No matter how often I explain I’m actually SAVING money, they just harp on about how “Real estate always goes up.” Talk about zombies. I do wish I had a dog though, which would be a million times easier if I had a house with a yard. I can’t wait for this bubble to pop.”

5. Vansanity January 24th, 2011 at 9:09 am
“My inlaws saw that piece on CBC and they called up in a panic, “oh my God prices are going up again, what are you waiting for?” I told them, hey, if you want to buy us a place for $1M I won’t stop you. In other words, put your money where your mouth is, cuz I have, that’s why it’s in the bank.
My wife and I ideally would like to have a place in East Van or Burnaby but we refuse to live “house poor” as some of our friends and family do. I haven’t convinced my wife to move away, but the longer this goes we might eventually take off and move to sunnier pastures. You know the saying the grass is always greener, well when it comes to real estate and money and Vancouver to the rest of the world, it might be true.”

6. VancouverFiveOh January 24th, 2011 at 11:32 am
“I have been bearish since 2006. I’m a logic and math type and that has served me well in my profession but perhaps not so much when it comes to housing. I could have flipped a bunch of west side homes by now, right?
Count me among those who are seriously considering leaving Vancouver. I was born and raised here but am tired of this city and it’s “best place on earth” attitude. I’m also tired of the rain. Today sucks.”

7. Dan in Calgary January 24th, 2011 at 11:45 am
“I was born in Vancouver, left and moved back in 1975. I spent more than 30 years of my adult life in Vancouver, leaving for Calgary in 2007. Vancouver’s rain was an irritation to be tolerated as long as the city had charm, class and a friendly, laid-back kind of atmosphere, with a small enough population that one could actually enjoy what Vancouver offers. But that all changed, particularly beginning when the Olympic hype started. Then the rain became intolerable. Today Vancouver is mere hype.”

8. /dev/null January 24th, 2011 at 11:56 am
[In response to “Let’s poll how many would have said: I wish I bought a property a few years ago.“]
“I almost did but I’m glad I waited. Instead we both moved to part-time work – me to finish my degree and my wife to spend more time with our kids. With a mortgage we couldn’t/wouldn’t have done that. Now we can actually afford a house instead of that condo we were looking at, despite the run-up in prices. So we chose to invest in increasing my employment income (and raising our kids) versus real estate. So far I’m happy with the decision. Don’t assume that bears are just sitting around with their life on hold because they haven’t yet purchased a home.”

9. exWestEnder January 24th, 2011 at 1:46 pm
“We moved to Paris (France) to see if it could possibly hold a candle to The Best Place on Earth. My partner got a transfer to the Paris office in Sept 2008. We moved in November, and man, we were we ever grateful that, as renters, we did NOT have to sell in that particular RE market. So now we’re enjoying all those French clichés: 7 weeks vacation, job security, cheap wine, amazing food, and a city where Lotsa Stuff Happens. … If our wanderlust fizzles and the Van property market ever returns to earth, we can come back knowing we already have a generous down payment….if we want to buy. On the other hand, when I remember the rain I might opt for putting it towards a farmhouse in the south of France instead….”

10. Patiently Waiting January 24th, 2011 at 1:59 pm
“I have almost a million reasons to cheer for high real estate prices. They are the dollars my parents house is “worth”. I will inherit the house which my parents own outright. But I remain a bear because I hate what’s happening to this city culturally, feel sad for families who are struggling because of this, regret what this is doing to the economy (and my chances of getting decent work), want to see every real estate agent and mortgage broker humbled in a serious way, and logically know this can’t go on.”

11. painted turtle January 24th, 2011 at 3:05 pm
“The real estate mania had a great positive influence on our lives. When we moved to Vancouver in 2005, as a 35 year old professional couple with 2 kids, we did not question our future: 1) Find good/secure jobs 2)Buy a house with a yard and be in debt for ever. This was supposed to be the way to happiness. Well… by the time we both had a full time job, house prices were too high. So we looked for a great rental solution (took some time). Now the kids are old enough they do not really need a yard anymore. We realized that since we are renting, we are making more money than needed. We could both put a break on our workloads and spend more time on hobbies we first thought would have to wait for retirement age. We can take care of our health, spend time with our teenage kids, take extended vacations, live a slow life. We also save money, and can look for ethical investments rather than being obsessed with ROI. We are now exploring exciting career moves/education we could have never thought of before. Somehow, it feels like being in my mid 20′s. By the time house prices will go down, our kids will be grown up, and the need for a house will have vanished. Anyway, mobility/freedom is our lifestyle, and I am happy we did not give up on that. So I would like to thank everybody who bought a house in the last six years for preventing us from entering a system we do not believe in, especially since we were about to be lured into making a wrong step. People who confuse wealth for happiness might no understand us, but fortunately, not everybody must have the same philosophy of life.”

12. YLTNboomerang January 24th, 2011 at 6:57 pm
“I’m born and raised Vancouver and have had the opportunity to live for a few years in Germany/Belgium/Switzerland/US. I’ve been back for about 6 years now and have been a renter since selling in 2007. Does the irrationality make me want to give up and buy? NO WAY! I learned my lesson once already during the boom when I thought “maybe things are different now and the old style valuations no longer hold?”. Well, the result of that thinking lost me a fair amount on the market. I see the market today (more than ever) as a bubble and thus will never buy here until things come back in line with fundamentals. We’re happy renting and likely will do so when we move to Calgary in two years due to a planned advancement. I’ll keep an eye on Vancouver real estate and who knows, I could maybe even buy a place for retirement in the future if prices normalize.”

…and one bystander:

1. Best place on meth January 24th, 2011 at 11:06 am
“I have no intention of ever buying real estate in Vancouver. I am however enjoying watching this one-industry city commit greed induced suicide. This Ponzi scheme is mere entertainment from my viewpoint.”

2010-2019 Prediction – 2011 Update – “The Vancouver RE Bubble is like a large festering carbuncle on a dinner guest’s nose – so clearly present yet publicly unmentionable.”

We posted ‘Prediction For The Coming Decade: A Real Estate Bear Market Will Be Vancouver’s Defining Social And Economic Event’ about a year ago [27 Dec 2009], so time for a minor update.

Vancouver RE 2010 played out without any really big surprises. Mortgage tightening started, as expected, but the initial step was less restrictive than we’d anticipated, and credit remained freely available. Household debt pushed to record high extremes. As a consequence, the market was stronger from summer to fall 2010 than we’d guessed it’d be, even though seasonal sales were still tepid when compared with the last decade. The RE market was also likely supported by ongoing strong general stock market and commodities rallies (both of which are looking exceedingly long in the tooth, see below).

We still stand by the prediction items in the Dec 2009 post, and see no need to make any changes at this point. Local RE remains outrageously overvalued by all fundamental measures, and we anticipate that the inevitable coming RE bear market will have profound effects on our community.

The Vancouver RE Bubble is like a large festering carbuncle on a dinner guest’s nose – so clearly present yet publicly unmentionable. We sit and watch the machinations of the bubble in progress, in awe of how that which will seem so obvious to all in retrospect, is in the present essentially ignored.  As the market extends more and more, the bulls grow more and more complacent, and the bears grow quieter, and quieter, and some lie down and capitulate (and none can blame them for that exhaustion). These are all increasing signs that the market will turn, not that the bull will go on forever.

So, anything to add? Well, as an aside, we’ve been interested in developments in non-RE markets. We think there is a high risk of a very significant and broad pullback in risk assets over the next 12-24 months, and that would definitely speed the inevitable coming price drops in local RE. Such a deflationary wave would involve the general stock markets, the loonie, oil, other commodities, gold, silver, China, other emerging markets, Chinese RE. The US dollar will likely rally, surprising all the naysayers. Since we posted about this on 25 Oct 2010 [Contrarian Bet – The US Dollar Is About To Rally], the USD index has rallied from 77.1 to 80.2, or +4.0%, which is in the right direction and a modest start. [We admit that the USD is down in loonies through that same period, with the loonie moving from 98.03c to 100.3c. We see this strength as temporary, with fair value now probably in the low 90’s.]
Some of the observations on which we base our opinions include the following:
– The vast majority of analysts predict general stock market gains through 2011; in numerous stock market analyst surveys (Barron’s, etc), a full 100% of the individuals interviewed have been bullish
– Sentiment is heady: Yesterday, analyst Laszlo Birinyi published a report predicting that the S&P500 would rally another 124% from here by Sept 2013. (This after a 86% rally off the Mar 2009 lows. Dow 30,000 anybody?)
– Bull:Bear ratios are back to the highs of summer 2008
– Complacency is back to extremes (VIX back into the teens; currently 17.0)
– Insider selling is high; markets have recently pushed higher on decreasing volume; distribution pattern
– Mar 2009 to present was a powerful bear market rally; yields and P/Es did not reach bear market bottom range; the bottom for the bear market that started in 2000 is not yet ‘in’
– Baltic Dry Index is dropping (leading indicator for global economic activity)
– China is trying to put on the brakes to manage its RE bubble
– There are growing voices against Quantitative Easing in the US; limitless printing is not a given
– Precious metals stocks have been underperforming the underlying metals themselves
– Precious metals sentiment is high and widespread; even the real estate blogs are inundated with commenters certain that gold, silver, SLW, etc, etc, can only go up (because, after all, look at all the dollar printing!). Heck, even ‘Johnny Horton’ at RE Talks is touting the PMs. The precious metals are a very volatile market and, the majority of times we’ve seen this kind of confidence over the last ten years, the new/momentum money has been caught off-sides by multi-month corrections. [In the longer term we anticipate ongoing gold strength and further fiat weakness, and a likely gold bull market blow-off peak towards the end of the decade, but only after a substantial pullback in gold in the short and intermediate term.]

So, we foresee another deflationary wave starting hereabouts. This will likely not look exactly like 2008 (that would be too easy), but will probably be a slower process. If this does occur, interest rates will not increase.

But, let’s be clear, this is all an aside, discussion of the general markets is not the core focus of this blog. What happens in those markets may influence the shape of the coming Vancouver RE bear market, but not the fact of the RE bear market. Our RE market is so extremely overextended that we anticipate it collapsing under its own weight at some point, regardless of activity in other markets. Interest rates don’t need to rise for that to happen, nor do general stock markets need to plunge. A simple plateau in prices, increase in inventory, and a small percentage of speculators getting cold-feet would do it. Local properties are selling at 2 or 3 times their fundamental value. We expect homes like the one below on Vancouver’s Westside to sell for less than one million dollars before this is all over. That would represent, in this specific case, a drop of over 65% from it’s current asking price of $2.89M, and would still make it generously priced, actually overpriced, by global standards. Yes, folks, still expensive at a third of the price!

Bungalow On Acid – Can you start a revolution with 7 cans of paint?

We’ve always felt that the teal and cream of our downtown core could do with a bit of jazzing up… (anybody here ever been to Spain?)
Anyway, we are grateful to the owners of 1192 Lillooet Street (MLS V855710) for single-handedly trying to brighten up the entire city.
[and thanks to instigator at RE Talks for letting us know.] -vreaa

“Update on an Olympic Village rental condo, where the asking rent is decreasing.”

El Magnifico at VREAA 31 Oct 2010 1.12pm“Update on a rental property I posted some time ago. Rents are decreasing as well…
I have been following this 1BR 630 sq.ft. condo in the Olympic village. It has been for rent since at least early August 2 for $1750! (I even sent them an email early September to tell them that there was no way they were going to find a fool that would pay $1750 per month for that). After sitting empty for 3 months, they finally followed my advice and decreased their price to $1,650 which is still very expensive considering the size, location and bad publicity around the OV…
I’m wondering how long it will take them to find a tenant and how much it will have cost them to wait with their overpriced condo sitting empty…
Here is the link:

Contrarian Bet – The US Dollar Is About To Rally

Everybody and their dog seems convinced the USD is going to run off a cliff right now. The weekend’s G20 meeting did little to avert that assertion. Recent ‘the dollar is dead’ claims seem so shrill that, for the fun of it, we’ll stick our contrarian neck out here and say that the USD is about to rally. We’ve annotated the chart above at the point of this assertion, and we promise to update it before the end of the year, whether we are right or wrong in our prediction.
Of course, this all has implications for the immediate direction of the loonie, the stockmarkets, commodities, gold… but we’ll focus this prediction on the USD itself. For the record, this is a short term bet, and we’re not inordinately attached to the USD as an investment vehicle longer term. And everybody should do their own due diligence, naturally.
Below we’ve collected a few sample quotes from today’s news that are bearish the dollar, to contrast with our prediction, and to illustrate how convinced many are that the buck is tanking.

Quotes and headlines from today:

Dollar at Risk of Becoming ‘Toxic Waste’CNBC, 25 Oct 2010

‘G20 agreement unlikely to stop U.S. dollar’s downward trend’Financial Post, 24 Oct 2010 Excerpt: “This outcome should reinforce downward pressure on the U.S. dollar” – Todd Elmer, head of G-10 currency strategy at Citigroup

“The driving theme for the markets remains a lower U.S. dollar via [quantitative easing] for floating-currency countries and higher current account imbalances for managed-currency countries.” – Andrew Busch, global currency and public policy strategist at BMO Capital Markets, Globe and Mail, 25 Oct 2010

“Strange market with pockets not selling anything and others on fire.”

386 West 23rd Ave, Cambie area, Vancouver West
V854672; 3129sqft; 50×148 lot; Built 1943
Asking Price $1,649,000

This discussion regarding this property at RE Talks 19 Oct 2010:

thinktom (a Vancouver realtor) 9.28am – “This property at 386 W. 23rd had 4 offers Sunday. Firm deal Friday. Nice lot size. It had chickens in the backyard. … West side 50 ft lots are still selling like crazy, especially Dunbar, Point Grey, UBC-ish areas. Many multiple offer situations. Strange market with pockets not selling anything and others on fire.”

unicas 9:34am – “I have a client who does renovations, mostly on the West side. He told me when you call the listing agent, first thing they ask is how much over the listing price you want to bid. I guess Tom can varify if this is true or not. Lots of money coming in the market.”

vanpro 9:47am – “For the month of October so far (from REBGV stats published by realtors such as, we are on track for near 2nd lowest sales for October in last 10 years – only October, 2008 was lower (during worst worlwide financial crisis since Great Depression). At best, maybe 3rd lowest (depending on how rest of month turns out).”

Austin 10:36am – “It doesn’t matter. Interest rates are low, inventory is not going up, MOI and prices are stable. The market is in pause mode right now.”

Spot The (Disappearing) Speculator #19 – Bob Rennie: “I’ve Lost The Speculative Buyer”

Local condo salesman Bob Rennie describes how speculators have deserted the market for the Olympic Village condos, The Province, 8 Oct 2010
“We have a huge problem with the Olympic Village that it’s not for speculators, it’s for a community of homeowners. I’ve lost that buyer who says, ‘I’ll buy it today and over the next two or three years I’ll figure out whether I’m a passive investor or whether mom lives in it or whether we live in it and sell our house.’ ”

What Mr Rennie is saying is that when people stop buying Vancouver RE simply for the reason that they believe that prices are going up indefinitely, he (and by inference the whole market) has a problem. An interesting observation. One that local RE bears have been singing from the roof-tops for years.

We’ve previously described how almost ALL Vancouver RE purchases over the last 5 years (or more) have had a speculative component woven into them. People have only paid higher and higher prices under the assumption that prices would continue on their upward trajectory, regardless of their value by any fundamental measure. That is the very essence of speculation.

Well, speculation in Vancouver RE is now over, for perhaps a decade or two. Volume is down and prices are going to drop from these giddy heights. When that starts happening, prices will drop further and further, possibly on increasing volume, as weak speculative hands exit the market. These players will rush for the exits as the only factor that kept them in the market, namely rising prices, disappears. Price drops will beget price drops. At 25% off, we may get a bounce, but when we eventually get below that level, the drop will be even more precipitous.

We’ve seen speculative evaporation in the periphery, and now in the ridiculously overpriced Olympic Village condos mentioned above. But speculation will soon leave ALL areas of the market. We think that the most devastating aspect of this process will be when COVERT speculation disappears, meaning that those innocent looking first-time-buyers and move-uppers, who in recent years were merrily signing their lives away with background expectations of price increases, will freeze their buying intentions when they realize that the market has reversed.

What will prices be when people are buying homes without the expectation of price gains?
What will prices be when people are buying homes as shelter (+ modest ownership premium) and not as ‘investment’ (read: speculative) vehicles?
Certainly far lower than they are today.

“Many friends have purchased RE recently, and I’m gobsmacked by how much debt is flying around. I will not move back unless RE goes down at least 30%.”

Bear abroad at 20 Aug 2010 at 1:48 pm
“I am a BC bear in hibernation. I left the country in 2002 to work abroad in such tropical locales as Bermuda and Caymans. I grew up in BC and I do love the place (although I do notice that Vancouverites have gotten a bit too full of themselves). I made a choice a few years ago that my lifestyle and freedom are more important than buying a slice of my hometown. I will likely move back in about 5 years and I expect that I will be purchasing real estate at discounted prices. And if they don’t go down, then OH WELL!!! I will not move back unless RE goes down at least 30%. There are lots of great places in the world and in Canada where real estate can be purchased at a fraction of the cost. I can make a list of many friends that have purchased RE recently and i’m gobbsmacked by how much debt is flying around. The ugly truth is that none of them make near enough to support their debt levels. The salaries/economy in Vancouver is just not strong enough to support the prices that people are paying. The grind down will likely take years and the pain will be felt by all. In the meantime I shall be enjoying life in the tropics (tax free) and will continue to be entertained by the Vancouver real estate circus from afar.”

“She was struck by how many open houses signs there were in the area, but the thing that really caught her by surprise was that several realtors came up to them ON THE STREET and asked “What are you looking for?”

omega at 25 Jun 2010 10:32 pm

“I was chatting with a friend whose sister is looking for a condo in the Tinseltown area. Last weekend they thought they would pop into a few open houses. First she was struck by how many open houses signs there were in the area, but the thing that really caught her by surprise is when realtors (several in fact) came up to them ON THE STREET and asked “what are you looking for?”. She said it felt like she was in a developing country.”

“I’m getting rid of my pie in the sky, I can’t handle owning in this market.”

rofina at RE Talks 10 May 2010 10:28 pm

“Any recommendations for a sellers agent for Burnaby North? I’m getting rid of my pie in the sky, I can’t handle owning in this market. I sleep better invested in the stock market, rather then being a homeowner in Vancouver, to me thats a sign that I shouldn’t own right now.”

Vancouver RE Metaphor – Obvious, Yes, But Too Cute To Ignore

Fundamentals – “What Chart Is This?”

We often discuss fundamentals like price:rent and price:income. This chart reflects a ‘fundamental’ that is of central importance in understanding the Vancouver RE market.

Anybody care to guess?

[x-axis years; y-axis percent. I’ll post the source later.]

UPDATE and answer:

The chart shows Canada’s Household Debt to GDP Ratio.

It’s clear where the housing bubble came from.
Debt Increasing At An Unsustainable Rate.

It’d be fascinating to see the equivalent chart for BC alone.

[The chart is taken from a recent David Rosenberg commentary. ]

China’s RE Trading Volume Collapses – “Recent mortgage restrictions may be having an effect after all.”

China’s RE and stock markets have some direct effects on Vancouver RE in that a small number of local sales are to wealthy foreign investors from China. More important, however, is the psychological link between the two markets. Many Vancouver locals believe that our market is buoyed by China, and thus speculate on local property based on that premise. For the latter reason, this story is particularly important. It comes at the same time as ballooning inventory in Vancouver, and mortgage debt that is growing more expensive by the week. More on the Vancouver-China relationship HERE. -vreaa

China Skyscraper Village

From 27 Apr 2010

“China’s property transaction volume collapsed last week. Property trading volume went down 64 percent last week from a week earlier in Shenzhen, down 45 percent in Beijing, down 38 percent in Shanghai, and down 2 percent in Guangzhou. In China’s 35 main cities where housing market data was monitored by the newspaper [China Daily], 21 saw their trading volume go down last week, with the figure in Hangzhou going down 73 percent.

China’s recent mortgage restrictions may be having an effect after all. Obviously this is just a week’s worth of data, but if this weekly data turns into a longer-term trend, one has to imagine it could be bad news for prices.”

The Great Vancouver Real Estate Roller Coaster is currently the best online forum for sensible discussion regarding the Vancouver RE bubble. VCI host The Pope has now published an elegant video that allows one to experience the ups and downs (yes, downs!) of the Vancouver RE market, 1975 – 2010. Buckle up! –

Connect HERE to comments and discussion of this video.

“All the couples I know who bought in the past 4 years overextended themselves, and are going through very hard times. The stress burden on a family is huge.”

These overextended couples are reportedly experiencing stress near a bubble peak. Imagine how much more stressed they will feel when prices drop the relatively small amounts necessary to wipe out all of the equity that they have in their homes. -vreaa

Anonymous at 10 Mar 2010 2:27 pm

“All the couples I know who bought in the past 4 years overextended themselves (I mean mortgage > 3 x family income), and they are going through very hard times. The stress burden on a family is huge, especially if you have small kids that make you life crazy enough by waking up the middle of the night (this is almost the perfect recipe for a divorce). My friends also had to deal with post-buying depression: after a month, they open their eyes on the drawbacks of bying, the bills were pilling up, their home was smaller than what they used to rent, they started to realized the kids would soon outgrow their bedroom and their was no way they could afford a larger home. Then came the time when we were going for holidays, restaurants, or paying ski lessons to our kids, while “buyers” had to stay home and eat cheap. When I see a couple making $200,000 telling me they cannot afford the average sushi place, I find it bizarre… Another thing I noticed is the amount of time my friends spend looking at interest rates, inflation, bubble talk, etc… If they read prices might fall by 20%, they lose sleep (20% x 800 000 = $160 000, not something you save in one month… or even a year). I was obsessed with having a house of my own, so I bought a nice recreational property for cheap in a remote area.”

The Charts Don’t Lie – Water Consumption During The Gold Medal Hockey Game

Okay, this is off topic, and, okay, these are Edmonton stats, but they could just as easily be stats from Vancouver, and the chart is just too beautiful not to post. Thanks to my good friend Clive for send it along. From 8 Mar 2010 -vreaa

The New York Times – “The real estate development industry, unusually powerful in Vancouver, provided the city with an Olympic Village plan that ultimately was too good to be true.”… “What has Vancouver to offer other than its nice mountains and vastly overpriced real estate?”

Excerpts from ‘A $1 Billion Hangover From an Olympic Party’, by Ian Austen, New York Times, 24 Feb 2010

“O.K., are the Olympics worth it?” Mrs. Lombardi said while stopping for lunch at Murchie’s, a venerable tea and coffee shop. “I don’t want to be too negative because there’s good and bad, but I have to agree with my husband. All he can talk about is the debt. I’m worrying about what’s going to happen next.”

“Vancouver was always an odd choice to become the world’s winter sports capital for two weeks.”

“While it’s very hard to see all the costs, I think people are going to pay for it for a long time,” said Lee Fletcher. “Some people are going to benefit hugely, not the average guy. The average guy is going to see his taxes increase.”

The real estate development industry, which is unusually powerful in Vancouver, provided the city with an Olympic Village plan that seemed — and ultimately was — too good to be true. A development firm would finance and build the village on a desirable piece of city-owned land. After the Games, the developer would convert the accommodations into luxury condominiums and pay the city for the property. Vancouver would get its village and turn a profit as well. But cost overruns, combined with the credit crisis in 2008, destroyed the financing. Once in office, Mr. Robertson had to obtain special permission from the province to borrow $434 million to complete the village. In all, the city is responsible for about $1 billion in development costs, a situation that lowered its credit rating. If Vancouver’s real estate market remains strong, the city may recover most of that money. If not, Mr. Robertson said, “the city is on the hook for some hundreds of millions of dollars.”

Kennedy Stewart, a professor of public policy at Simon Fraser University in suburban Vancouver, remains unconvinced that showing potential investors a good time during the Olympics will resolve Vancouver’s long-term economic issues. The forestry industry, once the mainstay of its economy, has been devastated by a beetle infestation, the collapse of the housing market in the United States and competition from South America. While motion picture production companies and software developers have set up shop here in recent years, they lack the same economic impact. “What’s the substantive thing Vancouver has to offer other than its nice mountains and vastly overpriced real estate?” Professor Stewart asked. “The forestry industries have collapsed, so where is the money going to come from other than marijuana grow-ops?”

“I had clients sell in 2003 because of the impending bubble.”

This quote from a realtor who may be making use of sarcasm. If so, “many a true word…” – vreaa

thinktom at RE talks 13 Feb 2010 11:09 am

“I had clients sell in 2003 because of the impending bubble. They might be right one day.”

No Such Thing As Bad Publicity? – Associated Press, Sports Illustrated, and The Guardian Preview the Olympics

Winter Olympic rings in Vancouver harbour

The story of the Vancouver RE boom and the fantasy of Olympic glory have long been attached at the hip. We thus continue to monitor Games sentiment. Three major international news publications, MSNBC (Associated press), Sports Illustrated, and The Guardian, are currently running remarkably bleak articles on Vancouver and the 2010 Games. -vreaa

From ‘Vancouver’s Olympics Head For Disaster’ by Douglas Haddow, The Guardian 31 Jan 2010

“Just days before the opening ceremony, Vancouver is gripped by dread. Not the typical attitude for a host city, but understandable when you consider that everything that could go wrong, is in the process of going wrong. … In the mid-2000s the games were originally slated to cost a pittance of $660m and bring in a profit of $10bn. This ludicrous projection was made before the market crash – an event that the Vancouver’s Olympic committee failed to anticipate. … Conservative estimates now speculate that the games will cost upwards of $6bn, with little chance of a return. This titanic act of fiscal malfeasance includes a security force that was originally budgeted at $175m, but has since inflated to $900m. With more than 15,000 members, it’s the largest military presence seen in western Canada since the end of the second world war, an appropriate measure only if one imagines al-Qaida are set to descend from the slopes on C2-strapped snowboards. With a police officer on every corner and military helicopters buzzing overhead, Vancouver looks more like post-war Berlin than an Olympic wonderland. … This manic mix of hype and gloom is a byproduct of the games’ utter pointlessness. … It will be the best chance yet for the Olympics to be derailed and exposed as what they are: a corrupt relic of the 20th century that does little more than gut city coffers and line the pockets of developers and investors.”

From ‘As Olympics Near, People Are Dreading Games’ by Dave Zirin, Sports Illustrated, 25 Jan 2010

“The International Olympic Committee has leased every sign and billboard in town to broadcast Olympic joy, but they can’t purchase people’s faces. It’s clear that the 2010 Winter Games has made the mood in the bucolic coastal city decidedly overcast. … I spoke to Charles, a bus driver, whose good cheer diminished when I asked him about the games. “I just can’t believe I wanted this a year ago,” he said. “I voted for it in the plebiscite. But now, yes. I’m disillusioned.”… A sports reporter from the Globe and Mail said to me, “The optics of cuts in city services alongside Olympic cost overruns are to put it mildly, not good.” … Bringing together a myriad of issues, Vancouver residents have put out an open call for a week of anti-game actions. … Expect a tent city, expect picket signs, expect aggressive direct actions. Tellingly, according to the latest polls, 40 percent of British Columbia residents support the aims of the protesters.”

Image: East Hastings Street

[Photo caption] ‘Welcome to Downtown Eastside. Here, life is gritty, volatile and the slightest misstep can invite brutal retaliation.’

From ‘Canada’s Olympic City Has Notorious Skid Row’, Associated Press, at msnbc 30 Jan 2010

“Many of my clients with multiple real-estate properties plan to purchase additional properties with new money instead of investing in their retirement portfolio.”

What percentage of your net worth is in Vancouver Real Estate? For many buyers since 2000 that figure remains well over 100%. Even those who have owned for a longer period have a majority of their wealth in their home. The future financial health of Vancouverites is too dependent on RE. -vreaa

This from Real Estate Bear at 17 Jan 2010 11:22pm

“I am a financial planner and sold my house November 2008. At first my wife was reluctant to sell but as the market began to tank she agreed that it was the right thing to do. Now that the market has recovered she is questioning our wisdom of having sold. Our son in law is a realtor and thinks we were crazy to have sold and truly believes that prices will continue to go up. I can not even discuss my views with him that real estate will correct without him laughing at me and calling me a fear monger. Many of my clients have way too much house compared to the size of their retirement portfolio and are relying on their real-estate to fund their retirement. Many also have multiple real-estate properties and plan to purchase additional properties with new money instead of investing in their retirement portfolio. When I talk to them about the real estate being in a bubble they look at me in disbelief. I get paid to give advice, and it troubles me when a significant portion of my client’s assets are subject to a severe correction potentially affecting their retirement, they do not take my advice.”

[This could be a Vancouver anecdote, but not necessarily so, so it is tagged as broadly Canadian unless we hear from its author].

ABC News, Olympic Canary: “Will the Winter Olympics Be a Bust? There is next to no fanfare surrounding these games. There is actually even advertising time still up for grabs, which is virtually unheard of.”

As we’ve said before, Olympic exuberance and Vancouver RE market fantasies are joined at the hip, so we are following the Games with interest. ABC News suggests that the lack of high profile US stars and/or darlings will result in far fewer TV viewers for these Olympics. This is a characteristically US-centric view, but an important point nonetheless, as a large percentage of ad dollars for the Games do come from the US. They point out that ad time is still up for sale, unheard of for an Olympics that takes the stage in exactly one month. -vreaa

‘Will the Winter Olympics Be a Bust?’, a 3 minute television segment from ABC News, aired 10 Jan 2010.

Excerpts –

“So guys, it’s an Olympic year (as it is now every couple of years!), the Winter Olympics are kicking off in Vancouver next month. … Contrary to the usual Summer Olympic promotional blitz, [there is] next to no fanfare surrounding these games. There is actually even advertising time still up for grabs, [which] is virtually unheard of. And so we wondered what exactly is going on.”

“There is no doubt that Vancouver is in the shadow of Beijing.”

“On the eve of an Olympics without readily bankable favorites and thus little if any buzz just weeks shy of the opening ceremonies, the Vancouver winter games could fall flat Stateside.”

“NBC says it could lose hundreds of millions of dollars on this year’s Olympiad with companies like Johnson and Johnson, GM, bank of American and Home Depot deciding not to buy ad time.”

“You could stick your finger right into the roof where the ceiling meets the east wall.”

Two mainstream-media pieces on the same day focus on the unclear reliability of home inspectors. Locals have grown accustom to the pitfalls of poor construction, but does the simultaneous occurrence of two such articles from different outlets indicate more widespread buyer caution? -vreaa

‘Can you trust your home inspector?’, a TV program from broadcast 8 Jan 2010, with Erica Johnson & Mike Holmes.

‘Home inspection remains a buyer-beware environment’, a newspaper article by Derrick Penner, Vancouver Sun, 8 Jan 2010.

Darcy Zallen, a civilian employee of the RCMP, holds her inspection report as she stands in her master bedroom,  while contractor Jeff Bain removes rotten wood from the outside walls. Zallen had the home inspected and had no idea that the home needed major repairs. Despite a property inspector’s report that indicated some minor problems and noted a roof needed to be replaced within five years, Zallen faces spending up to an estimated $40,000 to make major repairs before she can move in. She purchased the home for $405,000.
“My main concern was the roof, because it was tar and gravel, but it had this weird metal covering,” she said. Zallen brought in roofing contractors to do maintenance, they told her the roof was beyond repair. And when other contractors started what she thought were cosmetic renovations, they uncovered a wall that was rotting away. “You could stick your finger right into the roof where the ceiling meets the east wall,” Zallen said.
(from the Vancouver Sun article).

Minister – “We should scrap or adjust policies that no longer comply with the goal of curbing excessively fast growth in property prices”

Ooops! Sorry… Wrong country! (but, curiously, correct policy) -vreaa

This quote from Jiang Weixin, minister for Housing and Urban-Rural Development, China, as quoted at CNBC 5 Jan 2010 11:30 pm, in an article titled ‘China should tighten credit for second homes’ –

“We should scrap or adjust local property policies launched last year that no longer comply with current macroeconomic goals or with the goal of curbing excessively fast growth in property prices”

Article excerpt: China’s housing ministry has called for stricter rules on credit issuance for second home buyers to curb speculation in the property market. The ministry has also pledged to increase the supply of affordable homes, another part of the government’s campaign to tame price rises in the sizzling property sector.

Prediction For The Coming Decade: A Real Estate Bear Market Will Be Vancouver’s Defining Social And Economic Event.

vreaa is taking liberties with this ‘end-of-the-decade’ note by departing from archiving anecdotes and instead posting a prediction:

A remarkable decade comes to a close. The bust, 9/11, the US sub-prime housing mess, extreme loonie volatility, failing forestry, commodity roller-coaster rides, the stock market crash of 2008, global recession. Each of these events affected Vancouver’s economy in an exceedingly limited fashion. The strength of the Real Estate market saw us through, and RE was without doubt the social and economic story of the decade. Now, factors threatening market health have steadily accumulated, and in our opinion they are approximating a critical mass. A virtuous cycle is about to turn vicious. All evidence suggests that Vancouver Real Estate is heading for a very significant bear market. Unfortunately, conditions have become so distorted that a simple return to normal will have profound and prolonged consequences for our city.  The coming housing bust will effect all Vancouverites, and the fallout will not be good. For our city, this RE crash will quite likely be the defining social and economic event of the next decade. The factors in the drama are distilled below. Comments welcome. – vreaa


‘The Vancouver RE Bubble And Bust’

.Act One – Background Stories:

“Best Place On Earth”.

“Running Out Of Land”.

Chinese Economic Growth.

Wealthy Foreign Buyers.

2010 Winter Olympics.

Grow-Ops; “Multi-Billion Dollar Underground Economy”.

“Real Estate Always Goes Up In The Long Run”.

Free Money; Government Distortion Of Lending Risk.

‘Affordability’ Based Solely On Monthly Carrying Cost.

“Prices Are Going Up”; Bidding Wars.

RE Dominates Social Dialogue; “My Neighbour Made 10 Years’ Salary Flipping.”

Uncritical Media; Vested Interests; Government Compliance.

“Buy Now Or Be Priced Out Forever”, Buying Panic.

Housing Predominantly Valued As Wealth Accumulation Vehicle.


The Major Players:

Overextended Local RE Owners.

Local Investors; Households That Own Two or More Properties.

Housing-ATM-Syndrome Sufferers.

Developers, With Lots Of Product.

Speculators, Waiting To Run For The Exit.

Boomers, Waiting To Cash Out For Retirement.

Equity So Life Changing, I’ll Cash Out Soon

Foreign Investors, Who Have As Yet Seen Nothing But Vancouver Gains.


Act Two – The Stage Is Set; Current Conditions:

‘Rent to Price’ and ‘Income to Price’ Ratios At Historic Extremes; Both Suggest Housing > 2x Overvalued.

Ownership Levels At Record Highs.

Slow Economy, Strong Loonie, Moribund Industries.

Rising Unemployment, Negative Savings Rate, Dropping Disposable Income, Household Debt.

Misallocation of Capital.

Demand From The Future All Used Up; Depleted Pool Of FTBs.

Adequate Supply.

Olympic Rental Market Underwhelming.

Double Top On Technical Analysis (For What That Is Worth).

Irrational Local Confidence; “We’re Different”; Complacency; Bull Hubris; Bear Capitulation.


Act Three – Coming Action:

Dropping Rents, Increasing Vacancy Rates, Worsening Fundamentals.

Mortgage Terms Tighten; At Least 10% Down, 30 Years Maximum Amortization.

Post-Olympic Blues; Olympic Nomad Exodus; Post-Olympic Supply.

Spring 2010 Supply.

Rising Interest Rates.

Price Falls Commence.

Speculator Supply.

Rising Taxes, HST.

Prices Drop Below Jan-Mar 2009 Trough Lows (15% Off).

“Prices Are Going Down”; Dearth Of Bids.

Foreign Investor Supply

Boomer Supply.

Seller Urgency; Irrational Fear.

Stagnation; Multi-Year Bear Market; BC Economy Struggles.

RE Vacates Social Dialogue; “My Neighbour Lost Everything .”

Housing Predominantly Valued As Shelter.

Prediction 2010-2019: A Real Estate Bear Market Will Be Vancouver’s Defining Social And Economic Event.

VREAA will continue to collect stories from the Vancouver RE Bubble ‘n Bust. Please post or e-mail stories from the trenches. The majority will be headlined. The blog posts read like a chronological series of stories. The category and tag sidebars allow you to access specific types of stories. -vreaa

[update: 31 Dec 2009, ‘Foreign Investor Supply’ added]

Related posts:

Regarding the possible relationship between Vancouver RE and Chinese stock & RE markets [27 March 2010].

The Stigma Of Renting In Vancouver [26 May 2010].

Price Drops Will Beget Price Drops [11 August 2010].

Regarding debt & the bubble, Two Charts: All You Need To Know About Canada’s Housing Bubble [26 August 2010].

A Housing Crash Rescue Cannot Be Legislated [6 Sep 2010].

Five Charts: Predicting Future Vancouver Housing Prices [11 Sep 2010].

Stealth Speculators & Shadow Inventory [17 Dec 2010].

“As frustrating as it may be” on the Wrong Side of the Bubble, the Bearish Position Remains Right [24 Jan 2011].

Disillusion Row, Numbers 1-12: Distracted and demoralized locals, many thinking of leaving. [2 Feb 2011]

On Government Intervention [16 Apr 2011]

The Third Fundamental: Total Housing Market Value to GDP – BC in the Stratosphere [7 May 2011]

It Is Dangerous To Blame The Consequences Of A Speculative Mania On One Sector Of Our Community: Let’s Make Sure We Don’t Do That. [18 May 2011]

Misallocation Of Human Capital During Speculative Bubbles – “What do you call societies that depart from meritocracy? What tends to happen to them in the long term?” [30 May 2011]

Was that it? ‘The Top’? [Possibly] [12 Oct 2011]

Land: Not Making Any More; Don’t Need To [9 Dec 2011]

Denying The Obvious Bubble – Close Your Eyes; Think Happy Thoughts; Don’t Use Nasty Words; Bad Things Will Go Away [7 Jan 2012]

Regarding the over-dependence of our economy on the property sector. [19 Jun 2012]

“So it looks like I am wrong about 0/40 mortgages!”

Even some industry insiders don’t understand the terms of their own mortgages, or the products that their clients have been using to purchase RE. -vreaa

Finance Minister Jim Flaherty now says he may tighten mortgage eligibility rules. Excerpts from a consequent discussion at RE Talks, starting 21 Dec 2009 8:42 am

MikeStewartRealtor (realtor) – “I have a 40 year amortization mortgage on one of my properties and my broker told me that is the way it will stay for the life of the mortgage. [see below -ed.] I am going to confirm this closer to the end of term, but this my understanding from him.”

MikeStewartRealtor (realtor) – “Where did you guys hear about zero down purchases here in Canada? I’ve done hundreds of deals and none have been zero down like you get in the US.”

Marco911 (mortgage broker) – “Almost all of the deals I have done were 0% down. Lenders want something but how they get that something is up to how creative the buyer/seller is.”

MikeStewartRealtor (realtor) – “I have many clients who have bought properties with lines of credit, but a mortgage was not involved. Please share with me your experiences of buying property with mortgages in Greater Vancouver with zero down. I am very interested to hear more especially these so-called 0/40 mortgages…”

silverman (realtor) – “I don’t know anybody who bought with zero down either. Even if the banks could approve such a thing, what seller in his right mind would accept an offer with zero deposit?”

MikeStewartRealtor (realtor) – “So it looks like I am wrong about 0/40 mortgages! I checked with Doug Atkinson at the Centum office attached to my office and 0/40 mortgages were allowed for a few years. He also said that my 40 amortization does not last the life of the mortgage. He also said with a 0/40 mortgages the client had to qualify for a 25 year amortization. I guess the lender would also supply the deposit.”

talking – “So, if Flaherty changes the rules on mortgages back to 25 yr max and some poor guy put 5% down with a 35 year mortgage, his mortgage will become a 25 year mortgage upon renewal? That’s gonna kill a lot of people, considering how many are already stretched at a 35/40 yr mortgage at historically low interest rates.”

Speculation In Vancouver SFH Market

Speculation is alive and well in all corners of the Vancouver RE market. -vreaa

348 East 48th Ave, Main, Vancouver East

MLS #V800943

1530 sqft House, 33×143 Lot, Built 1940

January 2009: Sold for $599,000

November 2009: Asking price $769,000

[from thread started by eyesthebye at RE Talks 15 Dec 2009]

“There’s your self perpetuating mechanism: newbie specuvesting landlord runs over his business obligations, makes the renter feel insecure, the renter jumps into a terrifyingly risky but looks-easier-to-live-in purchase situation.”

Being a renter is no picnic. There is always the risk of having a property sold from under you, and having to endure the consequent inconvenience of a forced move. The following two stories are likely the consequences of smart  landlords taking profits by selling.

Now, however, an increasing proportion of landlords are latecomer amateur speculators holding properties for price increase rather than for steady cash flow. Renters who are also prospective buyers may at some point face the bizarre situation of seeing long awaited RE price drops at the same time as being asked to vacate properties that their speculator landlords are hastily liquidating. But we’re not there yet.

Here are two back-to-back stories from of boom market volatility displacing stable renters –

duru2000 on 17 Nov 2009 5:19 pm

“My landlord (a realtor, btw) is selling the house expecting the prices to go down in 2010. I was thinking of buying at the end of next year, but since Bank of Canada kept the party running with crazy low rates I will have to wait a little longer. So I looked at craigslist and there are plenty of places to rent in my range ($1000 p.m.) right now, not like two years ago. I was playing with the idea of buying a place right now, but I’m not going to do it, I’d rather have a 200K mortgage at 7% than a 400K one at 3.5%. I can put a lot of money down, but it doesn’t make any sense right now.”

Absinthe on 17 Nov 2009 5:26 pm

After a lifetime of stable renting, my family and I went through some serious bubble related instability with our rental last year. Now we’re paying just slightly more for more bedrooms and a yard, so it’s turned out for now- but I must admit for the first time getting grumpy about this bubble. The insanity in the housing market is making rental feel insecure, and I’m having trouble feeling settled. That, I don’t like. But I realized there’s your self perpetuating mechanism: newbie specuvesting landlord runs all over his business obligations, makes the renter feel insecure, the renter jumps into a terrifyingly risky but looks-easier-to-live-in purchase situation.”

Bidding War Lost – “So let your home slip away for a couple of grand?… Ditch the pride and roll up your sleeves.”

This dialogue regarding a prospective buyer making an offer on RE Talks, starting Wed Oct 28, 2009 at 6:10 pm

househunting: “[The] market is pretty hot. We are in the market and made an offer and there are 3 others that the sellers are considering. The realtor asked if we wanted to up our offer, but our original offer was already over asking so we declined. Our offer expires tomorrow night.”

eyesthebye: “At the time we bought we were asked to “move up” our offer. It only cost us an additional 5K and a larger deposit. Why don’t you just
ask the seller what it will take to secure the property? Have them sign back the conditions to you after you say yes to the counter. Easy. If you like the property don’t let it get away for a stinking 5K – or relatively minor condition”

househunting: “The sellers no longer live here. We asked the realtor for info and all he said was there were multiple offers (4 total) and [asked] if we were willing to up our offer. We declined. Our offer was pretty strong as we went 2K above asking, [with a] closing date that works for the sellers as it is currently tenanted, and the only condition being a home inspection. We are pre-approved are not willing to pay more for this property.”

eyesthebye: “So let [y]our home slip away for a couple of grand? So glad I don’t function in ego mode. Do yourself a favour and ask what the sellers would like from you, it might only cost you an extra few thousand. You obviously like the property – ditch the pride and roll up your sleeves.”

househunting: “It has absolutely nothing to do with pride. The way it looks to me is that we have the best offer on the table. I am not getting into a bidding war. I can go up $3,000 only to have the realtor ask the other party to go higher and then – guess what ? – it comes back to me to go higher. It is a nice house, has a lot we are looking for, but not everything. Again the realtor said he couldn’t say anything [other than ask whether we were] willing to up our offer.”

eyesthebye: “I wouldn’t play that game either. If the seller isn’t willing to sign back to you in writing what they want then walk away. And if your realtor “can’t say” what the owner wants I’d look for a new realtor.”

househunting: “Well this is where I think we made a mistake. We made a strong offer on Tuesday morning but gave the sellers until Thursday at 8pm to either accept, counter, or reject. In hindsight I should have given them 24 hrs to respond. I am sure we will get something in writing but the sellers are waiting for last possible moment to do this. That way if they are able to get more offers on the table it gives them more options. It’s not my realtor that won’t say what the sellers want, it is the seller’s realtor. He won’t even return calls back to my realtor. We’ll wait till tonight and see what happens. I have another house in mind but can’t make an offer until I hear back from the realtor about our original offer.”

househunting (next day): “We heard back from the realtor, the sellers went with another offer, which is subject to financing, and wanted to know if we wanted to be in the position of a back up offer. We declined as we do not want to be in that position. The search goes on………..”

“All of us are first time home buyers so I guess we’re the ones who are driving the market.”

Who has been buying? This from noreason at RE Talks on Thu Oct 29, 2009 8:35 am

“I’m an accountant but have moved into the finance side of things. I’ve been following the [message boards] since about May [2009] when deciding whether to jump into the RE market or not. I can give some feedback on the 400-550k market range, ie high end condos or houses out in the valley. I know personally 4 couples who have purchased + me and my spouse. We’re all in our late 20’s and all have combined gross incomes over 100k. All of us are first time home buyers so I guess we’re the ones who are driving the market. I can’t speak for them, but the reason why we bought was because interest rates are at a historical low and prices dropped a little. But the most important was we just felt we needed to get on with our lives in a new place. Renting before just didn’t feel right, we couldn’t make improvements to the place without feeling that you were wasting money. I have no doubt that interest rates will rise in the near future and we plan to use the max monthly overpayments and get that principal down in the next 5 years.”

“It is so engrained in our minds that owning is the way to go that people try to do it at all costs… Most people have the idea that renting is a waste of money, without doing any math.”

This from davers as a comment in a thread on VREAA 28 Oct 2009 at 2:39 pm

“I simply don’t understand all these people killing themselves to buy a home. I think it is just so engrained in our minds that owning is the way to go that people will try to do it at all costs. I was talking to a coworker yesterday and he was trying to figure out when he was going to move out of his parents house. He figured he would have all his debts paid off (student loans) and enough for a downpayment by the time he was 25. “But then you live at home until you are 25, why don’t you just rent and save money once you have your debts paid off?” I asked. “But renting is just a waste of money, I would rather just own from the get go” he answered. I quickly explained the rent I pay is less than what my landlord pays in property taxes, strata fees and mortgage interest, which are all ‘a waste of money’ as well. If I was to purchase my current place with 10% down and a 25 year mortgage, interest would be 1050, strata 250 and property taxes 125. (total 1425). Yet my rent is only 1200. That doesnt even take into account special assessments and the depreciation of the building. After this explaination of how I was actually saving 225 a month he began to reconsider his way of thinking. I got the feeling from this conversation that most people probably have the idea that renting is always a waste of money without doing any math. This is probably because save for the last 4-5 years and the blip in the early 80s, this calculation would show that the numbers are pretty close. People just haven’t realized how much this calculation has changed in the past few years.”

First-Time Amateur Landlord Speculators: “Did I tell you they get home stay students in their house?”

People are not just borrowing and betting to play the RE game in Vancouver… they are also extending themselves personally by taking on tenants in their basements, or even within in their own homes. All the gory details (in fact more than we need) about being an amateur landlord in Vancouver, circa 2009, from Greenhorn at RE Talks Tue Oct 27, 2009 9:33 am

“I know several first time home buyers under the age of 30 who are also first time landlords. Buying an investment property is the only way they can afford to buy a house in Vancouver. Perverse isn’t it? The plan involves getting a 5% down mortgage on their house which is borrowed from the Bank of Mom and Dad or the Bank of Grandma. They also borrow the down payment for the investment property from the same place. Once the investment property doubles in value in 5 years, they pay off the parents/grand parents and pay down the mortgage on the house that they really can’t afford. Did I tell you they get home stay students in their house? Several people I know are renting out bedrooms to two or more students at $750 per student. That’s an extra $1,500 per month so they can pay the mortgage they can’t afford. So they have international students and their friends coming and going all night. They wake up early to make breakfast and lunches like slaves. Did I tell you some of these students have poor hygiene and stink? Did I tell you jewelery has gone missing? Did I tell you some students forget to flush the toilet everyday so there is a nice present waiting to be seen every morning? Did I tell you about the lack of tenant screening on the investment property because they ask an above market rent and only get the riff raft? The bounced cheques. The late cheques. It is causing lots of stress.”…”What is scary is the parents/grand parents had to mortgage their homes to lend junior the money. Vancouver has made a whole industry/economy out of high priced real estate and entitlement.”

kansai_92 adds, at 11:01 am

“This is the same as what I’m seeing amongst people I know. On paper it looks fine, but the one HUGE assumption is rising prices. If prices fall or even if they are FLAT, the strategy unravels.”