Not Good For The School – “The chance of them coming here, even with a massive research budget, is basically close to zero becuase they can not afford the housing that they would be accustomed to for their life situation. If this city continues as it is for the next 20 years, we will have no more city.”

“I was at a party last night. Some interesting local celebs were there as well as some normal people (like me). One was a young professor from UBC. They are from out of town and are quite open to both renting and leaving town in the mid-term as it does not make sense to own here. They also commented that the University has had little success in attracting talent from outside Vancouver to fill top-level positions. Let’s say you want to hire a new dean of Science. You have found a 48-year-old who is at the top of the field, an amazing educator and researcher and who would be a trophy to have in the school. The chance of them coming here, even with a massive research budget, is basically close to zero becuase they can not afford the housing that they would be accustomed to for their life situation. Thus – most jobs are being filled internally now. Not good for the school.”
– from a comment by yvr2zrh at VCI 21 Dec 2012 4:36am

In the same comment, yvr2zrh also made the following interesting and archive-worthy statements:

Regarding market sentiment and activity:

1.) MOI for December will be the second worst in 15 years. We will likely hit 11. This is a really bad sign as we are typically quite low at the end of the year.
2.) Comparing to 2008, we are deteriorating now. For December, there are even pockets of Vancouver where we may see the December sales lower than December 2008. For November, we compared against November 2008, which is likely Vancouver’s worst month in history. We were up 90% against November 2008 in terms of unit sales but for December 2012, we are only going to be up about 35%.
3.) Van West Detached, Van East Attached and North Van are trending below 2008 lows.
4.) We are starting to see serious motivation in some sellers. Although we have the real estate board spewing out concepts such that sellers will collude to restrict supply to keep prices high, this just does not affect the market. We have a free and open market with 10,000′s of market participants. You will have a lower supply when prices are weak but this will not counteracy the downward forces of the market.

Regarding Carney’s housing allowance in London:

As someone who has worked around the world for over 10 years and who knows many of the housing situations for executives in Central London, I am not surprised or shocked at the alllowance and what this will allow him to get will be nice but not outrageous for someone of his level. In London, for $20,000 per month, you can get a decent apartment for an executive family. Remember that he will keep his house in Canada and only move there temporarily. Thus, he will need to pay out of his own pocket, extra rent, which when paid for by the BOE is taxed. Thus, a 400,000 annual allowance will basically be enough for him to get a 2,400 sq ft apartment in the city of London in which he can live and possibly use for typical entertaining.
That being said – if UBC were to hire a professor to come here on a permanent basis, in order to make them whole on housing, you would likely need to offer a 1.5 million signing bonus, which would be taxed, and from which they would have enough to get into the housing market at the level which they are accustomed to. If this city continues as it is for the next 20 years, we will have no more city.

BC Realtors Predict ‘Unsexy’ Market – “Over the next year or so we expect price changes to hover around zero”; “Price increases of the last decade are long gone”

Announcer: “There hasn’t been a crash, thankfully, but Ottawa, and the Bank of Canada, are desperate to raise interest rates once the economy improves. Economists are expecting rates to start inching upwards by late 2014, meaning that the price increases of the last decade are long gone.”

Cameron Muir, BC Real Estate Association economist: “We expect the market in Vancouver is going to be unsexy over the next year or so… uh, uh, long term trend sales activity… prices… probably pretty flat, we expect prices to stay.. hover around zero… percent or two on [inaudible] side.. depending on what community or neighbourhood you’re in.”

– from Global News 19th or 20th Dec 2012 [video archived by GreenhornRET; hat-tip El Ninja]
—

Next year will likely see the first very clear declaration of substantial price weakness in Vancouver RE.
Yes, we’ve already seen some price drops, but the numbers are not very remarkable (1%, 4%, 7%), and have been easily hidden in reporting. They certainly haven’t yet pervaded group consciousness.
Realtor association predictions tend to (1) extrapolate recent activity and (2) err on the side of optimism. These calls for a flat market are precisely that, and we are close to certain that they will be proven wrong.
It is noteworthy that even Global sees enough evidence to state plainly “the price increases of the last decade are long gone”.
—
I’d submit that the use of the word ‘unsexy’ is likely an unconscious attempt at delivering a sobering idea in a playful fashion, in the hope that it makes it somehow more palatable.
—
As an aside, consider these reports from the perspective of our recently discussed (mythical) ‘Discretionary Seller’. If you had already decided that you’d like to sell, and either had your property on the market, or had taken it off awaiting a strong spring, how would you feel about these predictions? What would you tend to want to now do? Those who reply: “Put another log on the fire and wait for a strong market (in 2014? 2015?)”, back of the class.
—
– vreaa

Bids All Insultingly Low So Taken Off Market – “We will just wait until the spring when the markets come back and we will get a higher price.”

“True story. Ran into neighbour. She just took her place off the market. It has been constant open houses. She told me the bids were all coming in too low. She was very insulted that people would bid so low. So she took it off the market because she “will just wait until the spring when the markets come back and she will get a higher price”. I didn’t say a word.”
– Girlbear at VCI December 5th, 2012 12:27 pm

Point Grey For Less Than $1 Million

4148 10th Ave, Vancouver Westside
Small 1929 SFH on 33×122 lot
Listed 14 Dec 2012, V982817
Ask Price $998K

Busy street, yes; lot value only, yes; still very overvalued, yes.
But a landmark on the way down, nonetheless.
Properties like this will likely sell for about $400K-$450K in the trough.
– vreaa

Overheard On Robson – “They were talking about how prices had dropped. One said she was looking to buy, and was weighing up whether this would be a good time to do so.”

“My wife was walking on Robson Street last week. She doesn’t look out for this kind of thing as much as I do, but she couldn’t help overhearing two women, aged about 30, dressed smartly, talking about RE. They were talking about how prices had dropped. One said she was looking to buy, and was weighing up whether this would be a good time to do so.”
– via e-mail from westsidefrank, 17 Dec 2012

The Myth Of The Cool-Headed Discretionary Seller – “I think that’s one of the reasons why the Canadian housing market is likely not going to have a hard landing because you’re not going to have a lot of motivated sellers – people aren’t going to be forced into it by rising interest rates or declining employment so they can take their time and wait for the market to stabilize.”

Seller’s aren’t competing with buyers, they’re competing with other sellers.

Vancouver sales dropped 27.6 per cent in November compared with November 2011, after tighter lending rules came into force this summer. The average price is down 6.3 per cent for the same period to $682,215, while the MLS home price index is down 1.7 per cent from a year ago. The average price reflects the mix of sales, while the HPI reflects price changes for typical homes. …
BMO deputy chief economist Doug Porter called Vancouver a “rather obvious exception” to the soft landing that most Canadian cities would see for their real estate markets. “I don’t know that I’d call it a hard landing in Vancouver, but it’s definitely a bumpier landing than most cities in Canada are going through right now,” Porter said. Meanwhile, it appears people thinking of selling their homes are holding off, especially in Metro Vancouver, which saw the largest drop in the country for new listings. New supply reached its lowest level in more than two years, CREA said.
“That may help avert a harder landing for prices because sellers do have the leeway to back off,” Porter said. “Fundamentally, I think that’s one of the reasons why the Canadian housing market is likely not going to have a hard landing because you’re not going to have a lot of motivated sellers – people aren’t going to be forced into it by rising interest rates or declining employment so they can take their time and wait for the market to stabilize.”
– from ‘Bumpier’ landing seen for Vancouver real estate’, Vancouver Sun, 18 Dec 2012 [hat-tip Edmund Garland]
—

There have been many stories that served to stimulate Vancouver’s RE mania. The most prevalent latter day myth appears to be that of the discretionary seller. We are all invited by many commentators (bankers, realtors, commenters on the blogs), to imagine the cool-headed seller deciding that, no, this is not the right time to sell, and backing off, biding their time, waiting serenely for the next leg-up in the market; in calm and comfort, perhaps next to a fire with a good book; no hurry, no urgency whatsoever.
I believe that this construct is complete hogwash.
I’d submit that, in the vast majority of cases, once an owner has made the decision to sell, they start the mental preparation for unloading that property. They move into a position where they disinvest themselves of the idea of ownership, and a clock starts ticking.. they have a building desire to convert that asset into cash, to ‘get out’ of the market. In a market where prices have barely budged, but sales are weak, they may be able to convince themselves that a more robust time for sales is just around the corner, so they may take their property off the market. But make no mistake, they remain very much in the ‘sell’ mode, they have their finger on the trigger, and they are waiting to unload. There is no intense urgency at that point; more a mode of expectation, of anticipation of coming action. Imagine now how that group of wannabe sellers responds when prices take their first substantial step down. Suddenly comparables are selling for 10% or 15% lower, and for lower prices than offers they themselves rejected 6 months before. Do these sellers remain cool? Well, a few may, but, here’s the point, a majority will not. They will experience new-found urgency, and many will rush to market. And only a few of them have to do anxious deals for prices to suddenly find themselves 20% to 25%-off the peak. And then more owners holding shadow inventory will respond, and so on. This is how speculative manias unwind.
The other side of all of this is, naturally, the buyers. There will always be some buyers, of course, at each step of the descent, but not enough to rescue the market; not enough to plateau it or take it to new highs. We won’t see a rerun of 2009 (although some of the early buyers will be “buying the dip”, in anticipation of a 2009-type rebound). Buyers will dry up because prices are falling. Yes, but won’t falling prices increase demand? asks the economist. Yes, falling prices increase demand, when those prices are falling from reasonable levels to cheaper levels such that the asset for sale looks like a good deal based on its fundamental value. But, when assets are at stratospheric prices, when people have been overextending themselves to buy at prices that are 2 to 3 times those supported by fundamentals, when people have been buying only because they anticipate future price strength, the dynamics are very different. People stop buying because their premise for buying (“prices will rise”) goes away.
Thus a powerful self-reinforcing system of price increase turns into reverse, and prices collapse. Falling prices beget falling prices. If that seems circular, that’s because it is. A ‘virtuous’ cycle turns ‘vicious’, and by this mechanism price drops that few have anticipated come to pass. Perhaps 2013 will be the first sharp leg down.
– vreaa

Vancouver Actor Bio – “When not acting, Anita enjoys flipping homes…”

– from Cast info for Metro Theatre’s ‘Lend Me A Tenor’, Nov 2012 [hat-tip Jeff Murdock]

Added to the ‘RE References In Popular Culture’ sidebar category.
The point is that there are more of these kinds of references to RE in unexpected places when we are locked in a spec mania, than in more typical times.
– vreaa

Vested Interests Meet Over Hors d’Oeuvres – “Only the best booze and culinary treats were good enough, to ensure another year of rubber stamping developments.”

“This may be a little off topic, but I found out that the Richmond Developers were wining and dining Richmond City brass last Friday.
Only the best booze and culinary treats were good enough, to ensure another year of rubber stamping developments.”
– Real Estate Tsunami at VREAA 17 Dec 2012 10:36pm

Not off topic at all. A central thread to the whole speculative mania has been the confluence of the interests of all the different parties who benefited from the run up in prices.
Note that this is not to suggest any form of elaborate or sinister or illegal collaboration. It is simply to point out that many local entities together benefited from years of debt-fuelled RE spending: government and lenders; developers, realtors, owners; advertisers & media; retailers; all sorts of individuals & organizations that experienced short-term benefit from the immense amount of capital flow that resulted from buyers taking out large mortgages and spending the proceeds. It is completely natural that all of these parties would work together to perpetuate a situation from which they were all gaining short-term benefits. Humans are like that. This is why speculative manias burn so bright for a period; so many come together to fuel the flames of the same fire.
– vreaa

Ignoring The Effects Of A Topping Bubble – “Interest rates have remained low and the economic backdrop has remained supportive for housing activity, so that should leave little doubt that recent changes to mortgage regulations are responsible for having cooled activity.”

“The market for home sales is chilling further after months of decline – and it’s putting Finance Minister Jim Flaherty on the hot seat. New data show sales deteriorating in November, and the association that represents Canadian realtors says sales will fall, not rise, this year and next. Mr. Flaherty, who sought to cool the market this summer by tightening mortgage insurance rules, says his actions are only one part of the story and that Canadians are voluntarily curbing their appetites for mortgage debt.” …
“Interest rates have remained low and the economic backdrop has remained supportive for housing activity, so that should leave little doubt that recent changes to mortgage regulations are responsible for having cooled activity,” CREA chief economist Gregory Klump stated in a press release.
– from ‘Realtors blame Flaherty as slump deepens’, Globe and Mail, 17 Dec 2012 [hat-tip allen]

A speculative mania eventually implodes under its own weight. It doesn’t need rising interest rates or a failing economy to bring about its demise. In fact, its deflation is more likely to bring on an economic slump than to be caused by it. In Vancouver, the market started slowing before the mortgage changes came into effect.
The erroneous argument put forward by the economist above has already been ‘collected’ in our ‘Erroneous Theories For Falling Prices’ category.
– vreaa

“His friend was squabbling over what to do with a house he and his brother inherited. Since neither of them wanted to be landlords, they decided to sell right away.”

“A long time friend told me his friend was squabbling over what to do with a house he and his brother inherited. Since neither of them wanted to be landlords, they decided to sell right away. I suspect they’ll be quite a bit of those in the years to come with our aging demographics. Perhaps adding more pressure on prices in the near future?”
– Seeking knowledge… at VREAA 14 Dec 2012 5:24pm

“My wife and I bought our first home in Oshawa in 1989 for $178K. Seven years later, after many renovations, we could only sell it for $148K.”

“My wife and I bought our first home in Oshawa in 1989 for $178K. Seven years later, after many renovations, we could only sell in for $148K. Mind you, we then bought in the same down market in Toronto’s High Park area. The home we bought in Toronto, for $325K, had been listed at $580K just 18 months before we bought it. That gives you some sense of how the market corrected. We sold that same house this spring, for $975K, exactly three times what we paid for it 16 years ago. It obviously does depend on when you buy and when you sell, it always has. BUT, we are experiencing prolonged and historic low interest rates, and Mr. Flaherty’s creation of the 0 down/40 year amortization did create a subprime effect here in Canada. We have never seen a run-up in home prices like this before. The correction, one would think, will be greater than the ones we’ve seen in the past, given that so many people are so over-leveraged.”
– comment by ‘ReMaxed Out’, at The Globe and Mail, 11 Dec 2012 11:27am

“We have never seen a run-up in home prices like this before. The correction, one would think, will be greater than the ones we’ve seen in the past..”
That’s pretty much our opinion, too. Perhaps the Vancouver 1980’s bust will compare. – vreaa

43 years old; Owns 6 Rental houses; Goal is to buy 4 more and retire by 50.

“A hard-working entrepreneur who runs a restaurant and retail outlet, Jim hopes to retire while he is still relatively young and live off the income from his rental properties.
Jim and his partner Bethany live with their toddler in her home in small-town Alberta. He is 43, she is 38. Jim also has a 12-year-old child from a previous marriage.
Jim’s short-term goals include buying four more houses – the ones he has are in Alberta and British Columbia – paying off his mortgage debt and perhaps forming a holding company if it makes sense. Longer term, he wants to retire comfortably at age 50 and leave something for his children.
Jim is doing well, bringing in $10,000 a month before tax from his businesses. He estimates his share – he has partners – is worth $750,000. Bethany, who keeps her personal finances separate but contributes to joint food and housing costs, earns $75,000 a year before tax.
On paper, Jim is looking good. He has $3-million worth of investment real estate. Still, he is mindful of the other side of the balance sheet – the $1-million-plus of mortgage debt, which he hopes to have paid off by the time he is 55 or 60.”
—
“So can Jim retire at age 50?
Jim figures he will have his mortgage debt paid off by the time he is 55 or 60. His financial picture at age 50 is less clear. As well, Jim doesn’t have a firm handle on how much money he will need when he retires. In his application, he lists “spending money” of $2,500 a month or $30,000 a year after tax.”
—
“Jim is taking home $84,000 a year from his businesses now plus another $12,000 in net rental income, for a total of $96,000. If he sells his share of the businesses for $750,000 and invests the proceeds at 4 per cent a year, he will be making $30,000 a year before tax. When calculating how much Jim might need in retirement, the adviser uses a rule of thumb of 70 per cent of preretirement earnings, which in Jim’s case would be $67,200 before tax. Thus his revenue properties would have to generate at least $37,200 a year after operating expenses to make up the difference, substantially more than the $12,000 a year they are throwing off now.”
—
“Monthly net income: $8,000
Assets: Bank accounts $25,000; stocks $50,000; TFSA $25,000; RRSP $25,000; RESP $10,000; six rental houses $3-million. Total: $3,135,000
Monthly disbursements: Mortgage $900 (his share of $1,800); other housing costs $790; car lease $500; other vehicle costs $390; groceries $250 (his share of $500); child care $900; clothing $300; gifts, charitable, other $150; vacations, travel $200; dining out, entertainment $250; clubs, sports $150; grooming $50; doctors, dentists $250; drugstore $100; cellphone, Internet $200; RESP $200; TFSA $400. Total: $5,980
Liabilities: Mortgages $1,062,000; car loan $17,000. Total: $1,079,000”
– image and excerpted text from ‘An entrepreneur’s path to early retirement’, Dianne Maley, Globe and Mail, 14 Dec 2012 [Hat-tip Makaya at VCI]
—-

Jim and Bethany have accumulated a net-worth of over $2 Million ($2.75 Million if he were able to sell his share of his business), by the age of 43, on a household income of less than $200K before tax. This is remarkable. It is highly likely that a large portion (almost all?) of their gains are due to the increase in the paper value of the six rental houses that they own. This would also explain their desire to “buy four more houses” – this sector has treated them well and they expect it to continue to do so.
As others have pointed out in the G&M comment section, simply liquidating all of their assets and investing in conservative instruments would already possibly spin off enough income for them to be able to retire soon.
A disastrous outcome would be the use of their equity to buy even more RE at the very peak of a nation wide speculative mania in housing. Worse still if they are tempted to use leverage by increasing their mortgage debt. This is the way that many with impressive paper gains on RE holdings, at this point in the cycle, will give them back (and in some cases even be wiped out) in the coming market weakness.
As an aside, note the misallocation of resources that comes with the speculative mania: in this case we have a couple considering leaving the workforce in their 40’s.
– vreaa

“I took a big gamble and bought a house in the Oakridge area a few years ago for around 700K, on limited income. I sold it last year because I knew I got lucky and didn’t want to push my luck.”

“I took a big gamble when we bought a house in the Oakridge area a few years ago for around 700K on limited income and sold it last year because I knew I got lucky and didn’t want to push my luck. Now we’re renting a condo in Vancouver.”
– Dashgall at VREAA 14 Dec 2012 10:45am

This is an example of speculative behaviour being bailed out by luck. Despite that, ‘Dashgall’ does deserve some respect, not for the initial bet (which was, indeed, a rash gamble), but (1) for having the insight to sell rather than “push (his/her) luck”, and (2) [special points for this one] for being able to admit that the profit was the result of luck, rather than attributing it to one’s own new-found investment genius (the commoner explanation used in this scenario).
Only a very small percentage of market participants will end up having sold in even the vague vicinity of the top. The majority will remain invested in the RE market one way or another, and ride their paper-gains down as the market collapses.
– vreaa

“I rent at Park West in Yaletown and was just at the holiday party, met several of the people in this building. I was under the impression that Yaletown was filled with speculators, but it seems that many of the people who live here are renting.”

“I rent at Park West in Yaletown and was just at the holiday party, met several of the people in this building. I was surprised by how many of them are renting. I was under the impression that yaletown is filled with speculators, but it seems that many of the people who live here are renting.”
– yvrness at VCI 12 Dec 2012 9:15pm

“Meaning of course that most of the condos are owned by speculators and are being rented out while their fortune grows.”
– Eddie, ibid.

“I would say about 50% of downtown condos are rented. That actually confirms the amount of speculation – just not by the people living in them. The owners live in their parent’s Surrey basement suites in order to afford the negative cash flow.”
– Anonymous, ibid.

“I’m hoping I can buy my daughter a decent size condo in Vancouver when she graduates from UBC next year. Even if she finds a good job, she will never be able to afford home ownership without my help.”

“When prices become unaffordable, demand should come down. At least that is what I’m hoping for, in the short to medium term, so I can buy my daughter a decent size condo in Vancouver when she graduates from UBC next year. Even if she can find a good job after graduation she will never be able to afford home ownership without my help. Renting is obviously a viable alternative if condo prices in Vancouver don’t come down. Or she can just return home and stay with me, my wife and our dog :)”
– comment by Simple Living at The Globe and Mail, 11 Dec 2012, 12:54am

Later on in the same thread ‘Simple Living’ adds:
“If I can afford to pay cash up to $1 million for a condo for my only daughter, it’s my choice and it still is simple living by my standard.” &
“$200,000 a year combined income will not buy you much of a condo in Vancouver at present, let alone a house. That’s why property prices in Vancouver right now are beyond what most working class people can afford. As soon as mortgage rates go up, a lot of over extended home owners will be in serious trouble.”

Speculators, Come Back! – “Those purchasing in a buyers’ market can reap huge rewards.”

– front page article ‘Buy it, Fix it, Flip it could be smart strategy’, REW.ca, 14 Dec 2012 [hat-tip Jack, and Happy Cynic]
Those flippers look.. youngish. Summer jobs? -ed.

Excerpts:
“The BCREA notes a turnaround in housing sales next year could trigger speculators back into action. Those purchasing in a buyers’ market can reap huge rewards.”
—
“When the market is down, like now, is the time to be buying”, real estate consultant Ozzie Jurock said.
—
Cameron Muir, chief economist with the BCREA said he is confused by the “bubble hyperbole” in much of the media. “There are minimal risks ahead,” he said. … “I just don’t see any reason to fear a long term downturn in BC’s residential market”.
—

Flipping is the most obvious form of speculation, and not really the one that interests us the most (that remains the average buyer who overextends to buy on the premise of rising prices without even knowing they are speculating).
We are not yet in a market that is good for buyers, not by a long shot.
This could well be the very worst time in the history of the Vancouver RE market to attempt a flip.
– vreaa

“The sharp run-up in house prices raises the risk of an abrupt correction. A sharp price correction would lead to falling collateral values and negative wealth effects, which could trigger an adverse feedback loop between economy activity, bank lending, and the property market. The property sector is the main source of domestic economic risk.”

“The International Monetary Fund has warned that Hong Kong could see an abrupt fall in property prices after years of dramatic increases in one of the world’s most expensive housing markets.
Home prices in the Asian financial hub have skyrocketed 90 percent since 2009 due to an influx of wealthy mainland Chinese buyers, pushing home-ownership beyond the reach of many of its seven million people.
“The sharp run-up in house prices raises the risk of an abrupt correction,” the IMF said in its annual review of Hong Kong’s economy.
“A sharp price correction would lead to falling collateral values and negative wealth effects, which could trigger an adverse feedback loop between economy activity, bank lending, and the property market.
“The property sector is the main source of domestic economic risk,” the Washington-based organization said.”
– from ‘IMF Sounds The Alarm On The Hong Kong Housing Bubble’, Business Insider, 12 Dec 2012

Okay, so, they’re talking about HK, not Vancouver, but what’s the difference?
“Running out of land” (and other fables); Spec mania; Bubble bursts.
– vreaa

“The young couple that moved in is currently listing the same unit for 30K less than I sold it to them for in 2011. If it sells at all it will be far below that.”

“Sold my 2 bedroom condo in Port Moody a year and a half ago in the mid 300K’s and I was lucky to get that. It took 6 months and it was in a really good building during the height of the market.
The buyers were honest and said they were going to live in it for a year or two then flip it for a profit.
The young couple that moved in is currently listing the same unit for 30K less than I sold for. If it sells at all it will be far below that. Flip fail!”
– Landbaron at VCI 9 Dec 2012 at 6:28pm

Ben Rabidoux Discusses Canadian RE – Why Analysts With Big Institutions Can Never Be Honest About Bearish Thoughts

Ben Rabidoux speaks to Bruce Joseph about the Canadian housing market.
Ben explains why analysts with major institutions are unable to honestly share bearish predictions (and, consequently, why one should always take their statements with a grain of salt).
– from Bruce Joseph, youtube, 1 Sep 2012

“I still say no crash in Vancouver in regards to single family homes.” [We Disagree]

“I still say no crash in Vancouver in regards to single family homes.
Sure real estate sales are slow – it’s December!
Spring will bring a flurry of sales in single family homes -don’t forget that “Real Estate is emotional”
As soon as the price dips a bit (maybe 10-20%) and there are lots of listings – people will flock to the market.
Vancouver is like the San Francisco of Canada. Prices never dipped there more than 20% from the peak and have rebounded to almost peak values . Check Zillow if you don’t believe me.
Vancouver has the mildest climate of any major city in Canada and is the most attractive major city in Canada.
Definitely no “crash” in Vancouver in regards to single family homes.”
– western observer at greaterfool.ca 11 Dec 2012 12:26am

Keep chanting “no crash in SFHs” and perhaps that will have some kind of buoyant effect.
We disagree with this ‘argument’, which is little more than an expression of hope. It also sounds like the seeking for reassurance.
SFHs are as overvalued as any other Vancouver property type, and we fully expect them to plunge in price to pre-spec-mania levels.
– vreaa

“My father bought and paid for our suburban Vancouver home within 2 years on a city worker’s wage. Second largest country in the world and I can’t afford a 50 year old house on a postage size lot in the suburbs. Things are supposed to get better, not worse.”

“My father bought and paid for our suburban Vancouver home within 2 years on a city worker’s wage, he paid for property taxes with one day’s pay. 2nd largest country in the world and I can’t afford a 50 year old house on a postage size lot in the suburbs. things are supposed to get better, not worse.”
– Led at greaterfool.ca 10 Dec 2012 11:21pm

‘Soft Landing’ Call Spotted

“Sure looks like you could just step out there, don’t it?”

“The Canadian housing market appears to have achieved “a soft landing” so far with sales cooler but still fairly steady along with prices, Scotiabank says.”
– from ‘Housing market appears to have achieved soft landing: Scotiabank report’, Canadian Press, 11 Dec 2012 [hat-tip Terminalcitygirl]

Will be added to the ‘premature bottom calls’ sidebar collection. -ed.

I Was Literally Shocked By Her Lack Of Knowledge Of Current Conditions – “Aren’t prices still going up in the lower mainland? I mean look at all those sold out presales in the news recently.”

“Last week I had a conversation with one of my co-workers, who recently got engaged, about her RE plans. Her fiance and her have fairly good paying jobs and are currently renting. She is a SFU grad and her fiance is a recent UBC grad. She told me she desperately wants to have a place of her own and is thinking about diving into the market. I advised her to wait at least a year and see what happens in spring of 2013 before taking the plunge. She then gave me a confused look and stated: “But aren’t prices still going up in the lower mainland, I mean look at all those sold out presales in the news recently.”After hearing that I knew she has not done any research at all. I then told her to check out this blog [VCI], Garth’s blog, and a few other RE blogs before she makes her final decision. I was literally shocked by her lack of knowledge of current conditions. In the last few months even the MSM has been reporting on the emergence of a “buyers market”. But for some reason she has filtered all those bearish reports and concentrated on the sensational stories of presale sell outs with people lining up just to get a chance to snap up a few units. Sometimes I just don’t get it. People are making financial decisions that will effect them for the next 25 years in some cases even more, and they base their decisions largely by their emotions sometimes irrational and the message being spewed by the highly biased MSM. In my opinion RE blogs are providing a great service to the general public by providing a different perspective of the RE debate and hopefully they can save a few sheeple from becoming the greatest fools of all.”
– Waiting to exhale at VCI December 8th, 2012 at 7:40 pm

The average Vancouver RE market participant continues to view the market as robust.
We expect this to change profoundly in 2013-2014, as price weakness becomes obvious.
– vreaa

False Creek Condo Drops Ask Price 56% Over 9 Months

# 206 1477 FOUNTAIN WY, False Creek, Vancouver West
1400 sqft 2BR condo
Original ask: 9 Mar 2012: $568K
Last ask: 1 Jul 2012: $320K (-44%)
– from “My mom has to get a certain price before she will sell. We are waiting for prices to turnaround.”, VREAA 3 July 2012 quoting from Vancouver Price Drop 2 July 2012

UPDATE posted by katrina at VREAA 11 Dec 2012 12:50pm –
“Same address was listed yesterday afternoon (Dec 10, 2012) at $250,000. Heard the building is undergoing rainscreening for the next year.”

Sure enough, from a realtor site, listed 10 Dec 2012:

—

That’s a drop in ask price of $318K, or 56%, since March 2012. -ed.

Avocados and Christmas Trees – Vancouver Land Use; ALR; Food

In view of yesterday’s spirited and informative discussion (thanks, all), we have withdrawn this morning’s teed-up anecdote and invite the continuation of yesterday’s discussion here today. [Here are a few comments from yesterday’s thread]:

“There seem to be some misconceptions about the size and capacity of the ALR.
“The minimum amount of agricultural land necessary for sustainable food security, with a diversified diet similar to those of North America and Western Europe (hence including meat), is 0.5 of a hectare per person. This does not allow for any land degradation such as soil erosion, and it assumes adequate water supplies. Very few populous countries have more than an average of 0.25 of a hectare. It is realistic to suppose that the absolute minimum of arable land to support one person is a mere 0.07 of a hectare–and this assumes a largely vegetarian diet, no land degradation or water shortages, virtually no post-harvest waste, and farmers who know precisely when and how to plant, fertilize, irrigate, etc. [FAO, 1993]”
Total hectares of ALR in fraser valley: 132,760 in 2009 (stats canada) (less today)
132,760/0.07 = 1.9 million people. That’s how many the ALR can support, best case scenario. That’s for people fed a subsistence, almost vegan diet, where one crop failure means famine.
Keeping current diets up: 265,500 people. (That’s 0.26 million).
Current lower mainland population: 2.6 million.
While fishing adds to the total number of people, we are nevertheless completely dependent on food imports. Any food supply chain disruption is going to cause a slight… inconvenience to the normal process of cellular respiration. Worth keeping in mind when we look at the planned growth strategy for the region – was it 4 million by 2050?”
– The Poster Formerly Known As Anonymous

“Out of anything that should be outsourced and diversified for stability shouldn’t food be? Locavore sentiments are great, but in reality, being able to transfer food from areas of plenty to areas with little is sort of a fundamental requirement for stable societies. Starving people tend to get pretty cranky.”
– UBCghettodweller

“The issue is transportation. We are wholly dependent on liquid fuels for that, and they just quadrupled in cost in a decade. It’s an awfully long way by sailboat or horsewagon from the places that have the food to those that don’t. The second issue are chemical fertilizers, which will also become scarcer, diminishing yields per acre everywhere.”
– The Poster Formerly Known As Anonymous

“The ALR is not about locavore sentiments. It’s about security. It’s well and good to diversify and outsource food production, but if one day one of the areas with plenty can’t or won’t send the food shipments for whatever reason, a shitload of people get very cranky, very quickly.”
– The Poster Formerly Known As Anonymous

“Acquaculture? More factory chicken farms? Electrified railways supplied by nuclear or hydro power? Nuclear generated hydrogen for transport? Not to be flippant or anything, but I’ve been hearing about the end of the world for over 2,000 years, and science has proven that mankind is unsustainable for 200 years. Yet our food production and productivity continues to grow, birthrate is declining in most countries, and we’ve always solved our problems before. I think it’s a bit egotistical to think that, even though everything, been (comparatively) skittles and beer for our species for 200,000 years now, it’s all going to go pear shaped before this generation passes the baton.”
– Ralph Cramdown

““Running out of land”. “Immigration”. “Mountains”. “Water”. “Hard asset”. The list goes on. What these rationales have in common, besides being fallacious, is that they’re nice ‘n easy for folks to understand, and make handy talking points for promoters. And how about this gem, heard from a senior RBC advisor, in defence of Vancouver’s current real estate prices: “Well, everyone needs a roof over their head!”
– El Ninja

“We are completely dependent on food imports.”
Then, why are we growing Christmas trees instead of wheat in the ALR?
– Cyril Tourneur

“Christmas trees? That’s part of what the Fraser Institute calls “human ingenuity and market forces.” Have you all considered that this obsession with being self-sufficient in the lower mainland is just a group version of ‘Prepper’ madness?
“Britain has not been fully self-sufficient since the eighteenth century. It imported large quantities of wheat, eggs and sugar during the Victorian era, growing an increasingly small proportion of what it ate until World War II, when millions of consumers followed the plea to “dig for victory”. This self-sufficiency trend was immediately reversed after the war ended, however.”
Even at the height of the Battle of the Atlantic, people weren’t starving in Britain. Those in the cities weren’t eating well, but they weren’t starving. And, not to put too fine a point on it, commodity and shipping prices were rather high at that point. Y’all are wanting to prepare for a worse scenario than that?”
– Ralph Cramdown

—

A few thoughts from a non-expert in this field:

This all looks like a problem with dietary behaviours as much as it is a problem with land use.
As an example, Vancouver Island apparently imports 90% of its food. We suspect that number could be reduced by a lot, but people choose not to produce the food and/or change their diets.

It seems people enjoy having access to the dietary variety offered by foods sourced globally. Who wants to give up avocados and bananas unless necessary? Consequently, dietary behaviour will likely be shaped by circumstance rather than choice: people will only give up certain items when they become unavailable, or prohibitively expensive. Fuel costs and other such considerations will likely apply natural pressures in this regard. People will have to adapt. If such changes happen in a precipitous fashion, that could be a problem.

As a society, should we put the effort and resources into developing an arrangement where we ensure that adequate ongoing protein and calories supplies for our entire population are available from BC & Canadian sources? We could do this, but there would be substantial expense involved. A bit like earthquake preparation, or forms of insurance. A diet from such sources would likely be far less diversified than we currently enjoy; it’d be more an emergency measure than an immediate and total replacement for current diets. Surplus during non-crisis periods (such as the present) could be exported, perhaps making the system partly self-supporting.
How close are we to having such a plan working right now?
If we had to immediately stop all food imports/exports, what would our diets look like?
Would we have enough calories/protein to sustain the Canadian population?
Even if we did set up such a plan, we’d expect people to continue to enjoy the diversified globally-sourced diet, while it was still available. Ingenuity may allow for current circumstances to continue for far longer than many anticipate.

Yesterday I expressed the opinion: “I think that the ‘scarcity’ of land (in Vancouver) is greatly over exaggerated, even within the ALR restraints. At the same time, I suspect that the ALR applies even further artificial limitations on land that is available… I suspect that there is massive amounts of land available for the accommodation of people, AND enough land to meet our agricultural needs.” Perhaps I’m wrong on the latter bit, as TPFKAA has suggested.
But what percentage of Vancouver’s food supply currently comes from the ALR?
If the ALR is only supplying us with a small fraction of our current diets, how important is it as part of any future food supply plan?
If the ALR is being used to grow Christmas trees, to support ‘hobby farms’, and to grow crops that are largely exported, why not more strongly encourage it to be used it for local food supply, or, alternatively, use it for housing?

– vreaa

—
Pre-emptive retort from TPFKAA:
“We need to start creating infrastructure that can tap other sources, or changing our profligacy with energy use, or both. While in principle there may be enough alternative energy to supply our needs, it takes many, many years to put the machinery in place to tap into these energies. You can’t build the port mann bridge in a day, nor can you replace the energy from oil at the pace of market forces. Market forces will lead to an abrupt cutoff, with not enough time to put that infrastructure in place. It’s hard to build and design shit when you hungry, the lights don’t work, and trucks can’t carry yo shit around. S’all I’m sayin, y’know?
The ALR is a damn important piece of land that needs not to have condos and sprawly mcmansions slapped onto it. It is a part of the solution.”

“Vancouver has a finite amount of land. The prices are only ever going to go up.” – Douglas Coupland, 2000

“Vancouver has a finite amount of land. The prices are only ever going to go up.”
– from ‘City of Glass’, [p22], Douglas Coupland, 2000
[hat-tip ‘proteus’]

Documenting the life of the “Vancouver is running out of land” meme.
We are particularly interested in trying to find record of its earliest mention.
Local historians, help us out. – vreaa

This question previously raised here:
‘Vancouver Housing Affordability – Century Long Crisis or Boom ‘n Bust Cycles?’
VREAA 25 Nov 2012

Double Negatives – “They might look like geniuses in 4-5 years. If anything, your language regarding “a dangerous time” makes me think they are making a contrarian move – not necessarily a bad thing in RE is it?”

“509 30TH AVE E
MLS® V981538
33x143sqft
2230sqft house built 1960
$859,000
SOLD for $868,000 on 3-Dec-2012 after 5 days on the market.”
– eyesthebye

“WOW someone actually paid over asking for this place, it’s a dump inside. Need at least $200,000 to renovate it up to current standards. Needs new electrical, plumbing, drain tile, roof, total basement reno, new kitchen, bath, among a few other things, totally not worth it.”
– red_lantern

“Land value – not home.
This 4719sqft lot means a new home of 3303sqft can be built on the site.”
– eyesthebye

“What I see is risk and the fact that they spent 900k on an asset that is extremely dangerous at this time. It’s like buying a stock after it soars. The higher it goes the higher the risk. I’m sure there is nobody in this forum that is buying right now, I’m sure some bulls here wouldn’t jump in, would they?”
– HAM

“They might look like geniuses in 4-5 years from now.
Time will tell I suppose.
If anything, your language regarding “a dangerous time” makes me think they are making a contrarian move – not necessarily a bad thing in RE is it?”
– gobigorgohome

[above exchange from RETalks 7 Dec 2012 1:35pm to 8 Dec 2012 6:45pm]

The vast majority of Vancouverites continue to believe that the local RE market will remain relatively strong. It’s the guy who sees the purchase as risky who is the contrarian, not the guy trying to get cute by out contrarianing the contrarian. The actual contrarian buy signal will be when the man-in-the-street in Vancouver is disgusted with RE as an asset class. This is still a long, long way off. – vreaa

Kelowna Garden Shed Rented Out To ‘Homeless’ Couple Makes CBC News

“A B.C. woman has been fined $500 for renting out a garden shed to a homeless couple and their three dogs.
A power cord that ran from the woman’s house in Kelowna, B.C., supplied electricity to the small metal building, for which she was charging rent of $200 per month.
– from ‘Homeless couple, 3 dogs, lived in garden shed’, CBC, 7 Dec 2012 [hat-tip Nemesis]

“Today at lunch my friend who lives on the westside said he just accepted terms with a contractor to build him a $300,000 laneway house at the back of his lot.”

“I never bring up the subject of RE with friends, but they always just volunteer this stuff. However today at lunch, my friend who lives on the westside said he just accepted terms with a contractor to build him a $300,000 laneway house at the back of his lot. 2 stories, 700 square feet.

I asked him how much he thought he could rent it out for and he said about $2000/month. I guess on paper that is sort of a 10% net return if you don’t consider the $1.7 million it cost to buy his house in the first place. Although I kind of wonder who would want to pay $2K/month to live in a shoebox in an alley, westside or not.

Also the contract is not fixed price, so if costs go over (like if it rains and lengthens the period of construction … and sometimes in January it does rain here) maybe the house ends up costing $350K-$400K. Seems like an odd thing to spend more than 2x the average US home price on a bunky in Vancouver.”

– HAM Solo at VCI 7 Dec 2012 1:58pm and at VREAA 7 Dec 2012 2:22pm.

Owners building laneway houses aren’t factoring in the market value of the land, which makes the price:rent math even worse. – vreaa

Further: People deceive themselves into thinking that they own a SFH in a desirable area of a desirable city, but they actually end up amateur landlords, running a rooming house with tenants in their basement and garage. [This applies to basement suites as much as it does to laneway houses].
That self-deception has been one of the bubble subplots; one of the mechanisms that have driven prices to artificial heights.
When folks sign the papers for these purchases (for which they have overextended themselves cruelly), they’re not thinking about the landlord math, they’re lost in the fantasy of SFH ownership. – vreaa
—

UPDATE:
Prior related posts of possible interest:

“What’s the Difference Between A Shed And A ‘Laneway House’?” [Drum-roll] “About $268,000!” [Cymbal]
VREAA 29 May 2012

Basement Suite In East Vancouver Sells For $590K
VREAA 24 Feb 2012

BOC Warns Of Circumstances That Their Very Own Policies Have Encouraged – “The most important risk to financial stability is the elevated level of household indebtedness and stretched valuations in the housing market.”

“High household debt and a heated housing market remain the biggest domestic threats to Canada’s financial system, the Bank of Canada said on Thursday, despite tighter mortgage rules introduced by the government in July.
“The most important domestic risk to financial stability in Canada continues to stem from the elevated level of household indebtedness and stretched valuations in some segments of the housing market,” the central bank said in its semi-annual Financial System Review.
Canada’s financial system remains robust but the overall risks to the stability of the banking sector remained high, unchanged from June, it said. …
Housing prices and construction in Canada roared higher in 2011 amid low interest rates, sparking fears of a U.S.-style bubble. The market started to slow after the government tightened rules on mortgage lending in July, the fourth time it had acted to curb borrowing since 2008.
The Bank of Canada’s two-year freeze on interest rates is also seen as a reason for the credit binge and the bank has said it could, as a last resort, use monetary policy to address the problem.”
– from ‘Bank of Canada says housing market risk still high’, Reuters, 6 Dec 2012

“Chief among those domestic concerns is record-high household debt, the inevitable result of rock-bottom interest rates that, nevertheless, have acted as a buffer against even more worrisome threats from outside Canada.”
– from ‘Bank of Canada warns own low rate policy poses risk to economy’, Financial Post, 6 Dec 2012

The Bank is warning us of a problem, while simultaneously confessing that its own ongoing policies have caused and are perpetuating this problem.
– vreaa

“The sales in the $725K-$800K range caused cries of disbelief and anger from my close family who bought a house down the street for almost $1M, in June.”

“Sellers in Burnaby North, like many markets, are busy chasing the market down, with very few getting out in front of the declines. I’m fortunate to have access to MLS, and I’m seeing many listings that were priced >$1M as late as August now well in to the $800k range.”

“This one, V972997, a foreclosure, is particulary extreme: original list $1.8M in Dec 2011, now listed at a fire sale price of 900k.”

“A couple of decent houses (V967123, V981232) in Brentwood Park area just sold for <725k. V967123 was originally listed for 988k in May! The sales caused cries of disbelief and anger from my close family who recently bought a house down the street for almost $1M in June. Their lot/house is nicer but still, you can see the doubt creeping in, even as they vociferously defend their investment.Things are changing in that market, and fast.”

– CashedOut At VCI December 3rd, 2012 at 7:47 pm .

It’s Different Here, Really It Is – “The rich are not the same as most people, otherwise Vancouver’s prices would never have risen so far above average household incomes in the first place.”

“The free-falling Vancouver housing market shows no signs of reversing its slide with the latest figures showing November sales 30.3% below the 10-year average for the month.
The Real Estate Board of Greater Vancouver now says consumers have begun pulling their homes off the market rather than settle for a lower prices in what is still the country’s most expensive market to buy a home.
Since reaching a peak of $625,000, the board’s MLS Home Price Index for all residential properties in the city is off 4.5% to an average of $596,900. Prices are off 1.7% from a year ago.
“Home sellers appear more inclined to remove their properties from the market today rather than lower prices to sell their properties. On the other hand, buyers appear to be expecting prices to moderate,” said Eugen Klein, president of the board.”
– from ‘Vancouver homeowners pulling properties off the market rather than settle for lower prices’, Garry Marr, 4 Dec 2012

“Given that Vancouver’s RBC housing affordability ratio has been about 92% of household income for awhile now, that must tell you that most homes here are bought by people with wealth. They can afford to hang on and wait for better market conditions, so it makes sense that listings are getting pulled. Conventional house price economic responses are more applicable to cities like Calgary and Edmonton that will react to changes in their (oil based) economy than they are to Vancouver. The rich are not the same as most people, otherwise Vancouver’s prices would never have risen so far above average household incomes in the first place.”
– ThinkRight commenting at Financial Post 4 Dec 2012
[hat-tip to JS who adds “I love the logical deduction that because the affordability ratio has been so poor, it obviously means that homes are bought by people with wealth.”]

Agreed, JS, you’ve got to love some of the bizarre justifications for current circumstances.
From the school of handwaving logic. Also, tautological.
“Prices are high for good reason (trust me on that) therefore they will stay high.”
And the bit about “the rich are different from most people”? (gack!!)
Regarding the article, and sellers pulling their wares in disgust.. they still do think it’s different here, but will discover it’s pretty much the same as everywhere else.
Sales are down; Prices will follow.
– vreaa

Vancouver RE Average Price Chart Nov 2012

– from REBGV, 4 Dec 2012

Headlined here for the record. Average prices are not the best way of following the market; averages (means) are easily skewed by outliers (especially in illiquid markets). The best measure are indices based on time1 to time2 same-property sales, like Case-Shiller and Teranet. Regardless, the average chart is published each month, and we continue to keep an eye on it. It’ll certainly be headline-worthy when detached average drops through $1M, and regular readers are aware we’re expecting later support (a bounce) at 2009 lows. For an older but still relevant chart discussion, see ‘Five Charts’ [VREAA 2010] – vreaa

Sticky Seller Ignores Bird In Hand – “He bought new in spring 2009. He is very frustrated that he can’t get a sale, but does not think that the problem is price! He thinks he just hasn’t found the right buyer yet.”

“Colleague at work bought a new 2BR 1200 sq ft townhouse in North Delta (Van suburb) for $330K. Now has 2 kids under 3 and has decided said townhouse is too small for his growing family; they want to rent for a couple of years and then “vultch” a house after prices have come off current peaks. Back in March this year he listed his place at $399K. On the market for a couple of months, only one serious offer, I believe $379K or so, they turned down that “insulting lowball offer”. Pulled the listing to try again later in the year.

Re-listed after Labour Day — this time at $409K. I know, why do they list (doesn’t sell), pull, then re-list later at a higher price?! Well, here is his and his realtor’s reasoning: felt in part that the place didn’t sell/attract offers last time for what it was “worth” because they had low-balled on price and therefore were attracting the “wrong perspective buyer” and were cheating themselves out of a deal at what the place was really “worth”. This is how these people think! And my colleague has a math and accouting background, totally understands numbers……

The townhouse is still on the market today — price drops to $405K, $399K, and currently $389K have not attracted any offers. Some young-ish couples have I gather expressed an interest in the high $370s (the price they poo-poo’d in March!), but in all cases (3-4 times I think), the parents of those folks, who are apparently ponying up the downpayment money, have said they think the price is too high for the location — specifically, within a block or so of a major arterial highway (which one might think would be a selling point given the traffic in the Van area – my colleague’s place does not actually hear traffic apparently).

There are so many units listed, buyers do really have a lot more time and options to shop around. I did try to talk to my colleague (he asked for my view as he knows I follow the RE market, even though I am a renter!) about getting ahead of the price reduction curve, to avoid chasing the price down, languishing on the market and STILL not getting a deal…. when it didn’t get any sniffs back at $409K, I said, given what he had told me about last March’s experience — drop the price to $379K, you want to sell, something “drastic” like that could precipitate an offer, multiple offers maybe and perhaps a price in the low $380s? He does have significant equity in the place about a third, depending on what the place actually is “worth”, so he is not at risk of being underwater….needless to say, he did the slow water torture price changes instead…..

I think he will be lucky to sell in the $360s…. and if this goes on until the spring, which it looks like it will if he is still listed, he will be looking at something in the $350s or even lower….which with breaking the term on his mortgage and paying the commission and transactions costs will leave him at net proceeds likely below what he got in at…he bought new in spring 2009…he is very frustrated that he can’t get a sale, but does not think that the problem is price! He thinks he just hasn’t found the right buyer yet…..”

– renters rule at greaterfool.ca 2 Dec 2012 8:36pm

High House Prices, Less Liquid Wealth – “The cheapest house in this neighbourhood goes for $1.2 million, but people are too cheap/poor to fork over $50 per kid.”

“Our elementary school, solidly in the “rich” Arbutus neighbourhood on the west side of Vancouver managed to raise $17,000 this year during its fundraising drive. Last year they raised $21,000.
Goal was $25,000. There are approx 500 students in the school, so the goal is $50 per student. They raised $34 per student.
Not sure you can draw an anecdote, maybe people are cheap or think their taxes should cover schools, I just find it quite sad/disgusting that when the cheapest house in this ‘hood goes for $1.2 million, people are too cheap/poor to fork over $50 per kid.”
– LS at greaterfool.ca 17 Nov 2012 6:55pm

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

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

Amateur Landlords Underwater And ‘Swinning Poor’

– from craigslist, Nov 2012 [hat-tip Terminalcitygirl]

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

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

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

“The 57-year-old bungalow that sat upon that land was simply a minor nuisance to the developer who replaced it with a huge and rather ugly Vancouver special which is currently for sale at an insanely higher price.”

“I sold my “land” for a stupidly high price in 2010. The 57-year-old bungalow that sat upon that land was simply a minor nuisance to the developer who replaced it with a huge and rather ugly Vancouver special which is currently for sale at an insanely higher price. That’s just how things are done around here.”
– Mister Obvious at greater fool.ca 30 Nov 2012 1:44pm

Realtor Chat – “There is little actionable support out there. A best guess low may be early 2014. … Sadly, we don’t live in a perfect world.”

“There is little actionable support out there. The sense we Realtor types get from our coffee sessions is that everybody is waiting and digesting the mortgage rule changes. The scary part is nobody will really know when the bottom hits. By the time we get there and figure it out it will have passed.
The Vancouver real estate market is a box of chocolates. A best guess low may be early 2014. A better wish to come true would be a steady flat market for 5 to 10 years. Those markets are good for everybody. The reality is that some politician will screw the whole thing up and we’ll all wish we bought something “back then”.”
– Larry Yatkowsky, local realtor, at his blog yattermatters.com, 1 Dec 2012 8:07pm

And sounding like testimony before a Senate committee:
“I readily acknowledge that I and my fellow Realtors are called a lot of things and yes we are known to say a lot of things that in many instances are on the edge of truth. By the same token, buyers and sellers tell us a lot of things that approach the same edge. It is neither right nor is it perfect. Each circumstance, individual and piece of information needs to be weighed, judged and acted upon its own merit. … Humans are prone to do what ever they feel is morally acceptable to them as a group or individually to get the upper hand over the other guy. In a perfect world equity for all would prevail. Sadly, we don’t live in one.”
– Larry Y, 2 Dec 2012 5:41pm, same thread as above

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

[Image from Time Magazine]

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

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

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

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

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

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

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

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

Still Leaky After All These Years – “Our landlord, who bought new in 2008, is in a tough spot. Bought as an investment for about $450K, could sell for about $380K today.”

“[I’ve been] living in Vancouver as a renter in the same building for 7 years. Have seen since moving in telling signs the building had moisture issues. Finally are going through rain-screening right now. It is costing each owner $120,000. So glad I am a lowly renter, and not the couple who moved in 2 years ago who were in a bidding war and decided to waive inspection.”
– machino at greaterfool.ca 30 Nov 2012 1:43pm

“We have friends that spent low six-figures in special assessments and had their buildings shrouded in green wrap for up to a year. Now many stratas are only able to get insurance with $100K deductibles (or more) and guess who pays the deductible when your sink leaks?
In our building (supposed high-end, granite, SS – etc) our landlord (who bought new in 2008) is in a tough spot. Bought as an investment for about $450K, could sell for about $380K today – not to mention their mortgage payments, strata fees, taxes and maintenance. At least they can write-off their losses, at least until CRA figures out there is no ‘expectation of profit’.
Their maintenance costs are high because of shoddy construction and cost-cutting.
No question renting is a ‘steal’ compared to ownership and certainly less risky.”
– Snowboid at greaterfool.ca 30 Nov 2012 12:27am

“Vancouverites labor under the delusion that we live in Southern California and not southern British Columbia. For this reason, we tend to build structures that would be appropriate in the Mojave Desert but certainly not in a rain forest such as the West Coast of Canada.
For the last 20 years, the landscape in the lower mainland has been covered with envelope reconstruction projects galore. Some are being done for the second time. We simply can’t get over our infatuation with Adobe stucco.
It’s absolutely appalling to see the soggy rot underneath these porous exteriors. Toronto has nothing on us when it comes to building inappropriate structures. We have hundreds upon hundreds of them in varying stages of repair.
On the bright side though, it does keep a lot of construction trades busy.”
– Mister Obvious at greaterfool.ca 30 Nov 2012

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

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

Denser On The Inside – “A legal multi-family dwelling in the heart of First Shaughnessy, with 8 suites generating almost $150,000 per annum.”

1926 Cedar Cres, Shaughnessy, Vancouver West-side
7,305 sqft 1912 SFH, on 121×149 lot
Sold 27 Nov 2012 for $4.49M
Taxes $18K pa

Realtor blurb: “Once in a lifetime opportunity to own this classic craftsman style home that is a legal multi-family dwelling in the heart of First Shaughnessy. With 8 suites generating almost $150,000 per annum this is the perfect holding property. The lot is 121×149 and the house is 7,305 SF. There are two “owner suites” that have been completely updated, each with their own laundry and parking.”

‘Almost’ $150K rental income, minus $18K tax, minus maintenance, minus property management cost, minus unexpected lost rent/lower rent — what’s the actual cap-rate on this?
The deal for the buyer is probably premised on rising property prices.
– vreaa

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

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

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

“I personally know 5 people that have overextended themselves buying multiple houses and condos, planning to sell in the future. None of them have gotten out yet and I know for a fact they are underwater on some of these and hoping to sell in the spring.”

“I personally know 5 people that have overextended themselves with multiple houses and condos that they only bought to sell in the future. These are not realtors or people that have any investmeny knowledge in general, they are people that have owned for a long time and took advantage of the mania of the last 6 years to leverage up to the max on as many propertiea as they could. None of them have gotten out yet and I know for a fact they are underwater on some of these and hoping to sell in the spring.”
– Groundhog at VCI 29 Nov 2012 3:05pm

Of all the ‘springs’ that we’ve been watching over the years, this one is perhaps shaping up to be the most eagerly anticipated.
There appear to be a lot of owners intending to list and sell in the spring. And bears are wondering where the buyers are going to come from.
– vreaa

“A relative of mine was at University, then left in second year, to become a realtor in North Van for the last two years. As of September, he’s returned to classes.”

“A relative of mine was at University, then left in second year to become a realtor in North Van for about the last two years.
As of September, he’s returned to classes. Before then, for several months, the number of facebook updates about multiple bidding wars, a balanced market, or open houses dwindled to zero.
To keep peace in the family, I specifically haven’t mentioned any of my heretical views on the Canadian housing market or asked why an English degree suddenly looked better than being a realtor in the “Best Place on Earth.”
– UBCghettodweller at VREAA 29 Nov 2012 7:48am

The tides; the seasons; breathing in and out.
Trends tend to return to means.
– vreaa

Overheard At Ben Rabidoux’s Presentation On Canadian Housing – “He asked “When do you think the crash will occur?” Ben, of course, said “Right now, sell now.” Shockingly, the guy next to me said “Hey man, that’s my landlord in Yaletown, he’s got 5 properties down there. I can’t believe it. He’s so screwed.”

As had previously been announced here, Ben Rabidoux gave a presentation on Canadian Housing in Vancouver 28 Nov 2012, and it was very well received by the audience of 650. We hope that Ben posts some form of the talk at his site. At VCI, people are relaying summaries of the talk, and sharing their experience of the evening. There were also some interesting anecdotal observations:

“Looking carefully, you also see a lot of “shooters” from the downtown finance scene. I was one row away from one of my friends on the “street” who went there independently, as did I. A few rows ahead was a guy who runs one of the largest investment funds in Vancouver. My read, the leaders in the big money crowd are starting to take the bubble talk seriously.” – HAM Solo

“Going into the seminar, I thought Ben would provide a more soft-moderate outlook to the bubble resolution, probably in line with bank analysts/economists, but he’s all-out hardcore bear armed with numbers, graphs, and a complete frank discussion about what’s out there and what will happen. He explains some stuff we discussed a million time here as well as some new stuff that we haven’t thought about before that will affect the market going forward. I was about 60:40 on soft landing vs crash before and now I’m leaning 90% towards crash.” – RaggedyRenter

“Lots of insider interest; one fellow introduced himself to David LePoidevin after the talk as a local construction insider looking to hedge downside risk by investing in a short-on-RE vehicle David offers.” … “Long story short, Ben is probably responsible for another dozen Boomer mansions hitting the market in January, priced to get out before Armageddon.” – Many Franks

“The people behind me kept asking each other questions about what CMHC was and it was clear neither of them had any clue.” – BLISTERINGAGENT

“The couple behind me decided that it might be a good time to sell their Shuswap Lake property.” – Bailing in BC

“The highlight for me was during the Q&A when a guy got the microphone, he was all dressed in a white pimp suit and asked “When do you think the crash will occur?”, Ben of course said “Right now, sell now.” Shockingly, the guy next to me who looked white said “Hey man, that’s my landlord in Yaletown, he’s got 5 properties down there, I can’t believe it, he’s so screwed.” It was awesome.” – Ray

—
UPDATE:

Presentation now up on youtube:
‘Canadian Real Estate: What happens next?’, Ben Rabidoux, Vancouver, 28 Nov 2012

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

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

A Big ‘Thank-You’ To The Insanity Of The Vancouver RE Market – “I sold my loft in a seedy part of Gastown that I bought for $168K in 2005 for $520K in 2011. Paid $220K for a nice 600sqft 1bdrm in downtown Halifax, and now I’m debt free, with $200K in the bank, at 26.”

“I recently moved to Halifax from Vancouver for grad school and its amazing how much more enjoyable life is when your debt free. I sold my loft in a seedy part of gastown that I bought for 168k in 2005 for 520k in 2011. Paid 220k for a nice 600sqft 1bdrm in downtown Halifax, and now I’m debt free at 26. I’ve got 200k in cash in the bank too, how many 26 year olds can say that?! and I have all of this thanks to the insanity that is the vancouver real estate market! I feel for these people though, our generation really got the shaft when it comes to the economy and real estate. I’ve got plenty of friends who did everything they were supposed to do to succeed in life and are working temp jobs to pay off 100k in grad school debts. If I didn’t have supportive parents I don’t know where I’d be right now.”
– jj at VREAA 27 Nov 2012 9:22am

Well done, jj. You were fortunate with the timing (because 2008 could just as easily have taken you back to pre-2005 prices), but that is now not material.
jj saw that $520K cash was of far, far higher value than a “loft in a seedy part of Gastown”. Anybody who cashes out in the vague vicinity of a top, by virtue of luck or skill, will do fine.
The point is that the person who overextended to allow jj to cash out, and all the thousands of other Vancouver buyers over the last 3, 4, 5 years who have done the same, are left holding the other side of the deal: A property that is worth far, far less than the future earnings that they have promised to pay to buy it.
– vreaa