“It won’t last. It just prepares the way for the bust. It forces out real businesses. And it drives out people who find themselves financially unable to live here any longer.”

When reading this article, Vancouverites may want to play spot-the-differences/spot-the-similarities. – ed.

How the Surge of Hot Money Pushes San Francisco to the Brink
Wolf Richter, wolfstreet.com, 22 July 2014 [also reprinted at zerohedge]

The median home price in my beloved and crazy San Francisco – that’s for a no-view two-bedroom apartment in an older building in a so-so area – after rising 13.3% from a year ago, hit an ultra-cool, slick $1,000,000.

It made a splash in our conversations. People figured that nothing could to take down the housing market. Yet, as before, there will be a devastating event: the moment when the billions from all over the world suddenly stop raining down on San Francisco.

Every real-estate data provider has its own numbers. The Case-Shiller placed the peak of the prior bubble in “San Francisco” in June 2006 with an index value of 218, well above the current index value of 191. Though named “San Francisco,” the index covers five Bay Area counties that include cities like Oakland and Richmond where home prices, though soaring, haven’t gone back to previous bubble peaks.

The $1,000,000 that DataQuick, now part of CoreLogic, came up with is for the actual city of San Francisco. In the data series, San Francisco’s prior housing bubble peaked in November 2007 when the median home price hit $814,750. People thought this would go on forever, that San Francisco was special, that the national housing bust would pass it by. A month later, the median home price plunged 10%.

It was the beginning of a terrible bust – the moment when money from all over the world stopped raining down on San Francisco. Real estate here lives and dies with the periodic storm surges of moolah from venture capital investors, IPOs, and corporate buyouts.

Now we’re in another storm surge. The Twitter IPO transferred billions from around the world to Twitter investors and employees in the city and the Bay Area. When Facebook acquired Whatsapp for $19 billion, its 55 employees and some investors started plowing some of this money into the local economy, money that didn’t come from heaven but indirectly from Facebook shareholders. In the current climate, hundreds of transactions, large and small, take place every month, including a slew of IPOs. That’s the great hot-money-transfer machine. And San Francisco sits at the receiving end.

There are some drawbacks, however. Number one, it won’t last. It just prepares the way for the next bust. Number two (and in the interim), it forces out real businesses with real revenues and profits. And it drives out people who find themselves – though well-employed – financially unable to live here any longer.

Take the story of Bloodhound that was catapulted into the limelight by ValleyWag. In January 2013, a Series A round brought its total funding to $4.8 million, based on its conference app, an “ambitious vision to fundamentally change how buyers meet sellers,” as TechCrunch put it. “Its hardcore dedication to product and the fact that it can reuse everything it builds puts it leagues ahead of….” Etc. etc. The article was dripping with startup hype.

Companies like Bloodhound are flush with money from investors and have no need to make revenues or profits, and they have no clue how to manage expenses, or that expenses even need to be managed, and there’s nothing to constrain them in any way and force them to be prudent with investors’ money. Armed to the teeth this way, they dive into the local real estate market.

As the startup bubble in San Francisco was coming to a boil, and billions started showing up in bits and pieces, landlords began lusting after this money. And so in October 2012, the Million Fishes Art Collective – “an incubation program” for artists – was not able to renew its lease on a 10,000 square-foot space on Bryant Street at 23rd Street, in the Mission, which had been an iffy area and therefore affordable. After ten years, Million Fishes was gone, and so were the artists and the shows that had been open to the public. It reportedly had been paying over $13,000 per month.

The space was prepared for a startup armed with hype, hoopla, and Series-A money piped in from VC-fund investors around the world. Along come Bloodhound with whatever remained of its $4.8 million in funding. It signed a 5-year lease for $31,667 a month in rent and $564 in fees, or nearly 150% more than Million Fishes had paid. The neighborhood wasn’t amused, but hey, big money rules, and it was a done deal.

So Bloodhound was blowing $387,000 a year on rent, and it didn’t care because expenses were no objective because profits weren’t even on the horizon. It was just building a thingy that would forever change the world. But now Bloodhound is gone as well. Stopped paying rent, ran out of money, just packed up and disappeared. ValleyWag reported:

When emailed for comment, Bloodhound co-founder Anthony Krumeich simply stated “We moved out of the office. No longer fit our needs.” However court documents indicate Bloodhound has gone AWOL and abandoned their office. The landlord’s attorney has not been able to issue the company or its founders a summons….

Bloodhound didn’t change the world. But its hot money changed San Francisco. It helped drive up rents. Each transaction impacts a number of future transactions via the multiplier effect. This scenario is repeated over and over. Enterprises with real cash flows are pushed out because they can’t compete with the hot money that briefly comes into town looking to multiply itself.

But occasionally, it goes too far, even for San Francisco. A little while ago, Pinterest jumped into the fray. It has raised $800 million so far, and sports a valuation of $5 billion, but has no noticeable revenues, doesn’t even dream of profits, and has no idea how to control expenses – and no need to. Armed with this distorted attitude and hundreds of millions of dollars in global hot money, it set its sights on the beautiful, historic 600,000 square-foot San Francisco Design Center at 2 Henry Adams St., where 77 design businesses were plying their trade the hard way by generating the cash flow necessary to sustain themselves.

The Design Center’s owner, according to the SFGate, “had sought to take advantage of a city zoning ordinance that allows owners of designated historic landmarks to change zoning from so-called PDR – production, distribution and repair – to traditional office space. That would have allowed Pinterest to locate its offices there.” The tenants would have been booted out in favor of a company that had no reason to care about how much money it blew on office space. Alas, after an uproar, the Board of Supervisors Land Use & Economic Development Committee voted to table the matter indefinitely.

The ratchet effect continues as each transaction impacts future transactions, pumped up by hot money that doesn’t care about actual expenses and profits. And the space Million Fishes had leased for $13,000 a month, and that Bloodhound had leased for $31,667 a month, went back on the market, ValleyWag reported, at $37,500 a month.

This too is happening to homes where one sale price of one home impacts the price on average of 60 others via the multiplier effect [How Wall Street Manipulates The Buy-to-Rent Housing Racket]. That’s how the median home price of $1,000,000 came about: powered by hot money that follows hope and hype about the next big thingy that will change the world. As before, someday the hot money will suddenly evaporate, with devastating effect. To pinpoint that moment, we just have to watch the IPO market. When it blows off its top, so will San Francisco.

UBS is already preparing for that moment. The world’s largest wealth manager is “very worried” about “the lack of liquidity” that could wreak havoc during the expected sell-off. So UBS reduces risk “over the full spectrum of assets.”

“I just visited Manhattan for a week, and happened to snap some real estate ads on both the Upper West and Upper East sides of the island. Compare to Vancouver. It simply doesn’t compute.”

“I just visited Manhattan for a week, and happened to snap some real estate ads on both the Upper West and Upper East sides of the island (both very affluent areas). Compare these prices for these apartments, located in the heart of the one of the world’s most important metropolises with all the employment opportunities that go along with it…. to how far one’s money goes in Burnaby, Downtown, etc. It simply doesn’t compute.”
– from ‘L’, via e-mail to VREAA, 8 Apr 2013

“Talked to a Vancouver man who sold all his assets in Vancouver. He told me he bought a newer house in Arizona for $105K that has a renter that pays $850 a month.”

“I went to a real estate seminar in Phoenix and the prices to rent ratios were awesome for investors. Talked to a Vancouver man who sold all his assets in Vancouver. He told me he bought a newer house in Surprise Arizona for $105,000 that has a renter that pays $850 a month. I guess Canadians have higher incomes for higher price real estate.”
– happy renter at greaterfool.ca 4 Mar 2013

High Paid Vancouver Workers Choosing To Live In The U.S. – “The cost of housing is four to five times what they are accustomed to; He did not want to move because he can have his $400,000 mansion in the U.S., versus getting a little home for $1-million in Vancouver; There are other really pretty places out there.”

Eric Murray is chief executive officer of growing clean-tech company Tantalus Systems, based in Burnaby, B.C. Mr. Murray, however, lives in Raleigh, N.C., where he owns a 3,500-square-foot house and puts his three kids through private school.

He is a Canadian, with several family members in Vancouver. But when his career trajectory sent him to Raleigh, he decided to stay put. Mr. Murray is one of a growing number of workers in the Lower Mainland who live in the U.S. You could call them cross-border jobbers.

“My father’s entire family is in Vancouver, so for our relationship, it would be great if I lived there,” he says in a phone interview. “But for me to pick up and move from Raleigh, where I have a fully wooded lot, and a very nice home, and I can send my kids to private school, this sort of stuff – to do that in Vancouver, I just can’t swing it economically. When we looked at this whole thing, we knew we would have to compromise on housing.

“Absolutely, I would live in Vancouver if I could afford it.”

Technology is the third-largest contributor to B.C.’s gross domestic product, says Bill Tam, president of the B.C. Technology Industry Association. He says there is demand for about 4,000 more employees in the industry, and the majority of qualified people come from the U.S.

“Especially in the Vancouver area, technology has been one of the faster growing industries,” he says. “So when companies have had to expand and recruit managers to come here from the U.S., some have relocated to places like Blaine, Wash., close enough to commute on a daily basis. That’s the level of creativity they’ve had to resort to.”

Others, he says, fly in from more distant U.S. locations, like Mr. Murray. Mr. Murray used to fly into Vancouver every other week. These days, he’s flying in every third week.

“When they come across and recognize the cost of housing is four to five times what they are accustomed to, they end up being commuters,” says Mr. Tam.

Sierra Wireless CEO Jason Cohenour, who was travelling and couldn’t be reached for comment, works in Burnaby and lives in the U.S. Tom Ligocki, CEO of Richmond-based Clevest, says he has several employees who live in a golf course community at Semiahmoo Resort, near Blaine. One of his engineers, Jeremy Westbrook, commutes from his home near Blaine to work in Richmond. It takes them about 30 to 40 minutes to make the drive.

“None of the folks in the U.S. want to move to Vancouver,” he says. “The simple example that I heard from one gentleman is that he did not want to move because he can have his $400,000 mansion in the U.S., versus getting a little home for $1-million in Vancouver.” …

“There’s no point in even talking about the Vancouver market. We are just talking to them about directly moving to the Semiahmoo resort,” he says, on the phone from a conference in New Orleans. “If you can’t bring them to Vancouver, that’s the only option we have.

“And they do certainly make very good wages,” he adds. “These are high-end experts that we are hiring.

“But all these folks are used to living in a house. They are used to American comforts, and they are well paid, and they can afford to have a nice luxury home wherever in the U.S.”
…

“I get into this discussion all the time with guys. Vancouver is great. The mountains and ocean are super. I get that. I would love to live there. I have a lot of family there. But I don’t see how the economics would work for a young person trying to do both of those things, unless they had a similar opportunity in another really pretty place.

“And I have been in a bunch of different countries and there are other really pretty places out there.”

– from ‘Some Vancouver workers have been priced right out of the country’, Kerry Gold, Globe and Mail, 22 Feb 2013 [hat-tip Aldus Huxtable]
—

Smart business people know: Vancouver RE is woefully overpriced.
– vreaa

Property Price Fluctuation In A Highly Desirable City

Example 1:
Refuses offer of $80M in 2008; Accepts offer of $37M in 2009

“After shlomo Ben-Haim, an Israeli scientist-entrepreneur, made millions selling a medical-device company he’d founded with his brother, a London-based lawyer, he agreed to invest $28.9 million of the proceeds in a nine-room, four-bedroom penthouse on the 40th floor of 15 Central Park West, the Robert A.M. Stern–designed luxury condominium in Manhattan—when it was still just a hole in the ground in 2005. But months after closing, in spring 2008, Ben-Haim put it back on the market—priced at a whopping $80 million.
With its private elevator landing, 14-foot ceilings, and sweeping Hudson River and Central Park views, the apartment quickly attracted a buyer, but the threat of a huge tax bite for selling less than a year after buying convinced Ben-Haim to spurn the offer. When Lehman Brothers filed for bankruptcy that fall, Ben-Haim took his penthouse off the market. Finally, in February 2009, it was offered again at the recession-reduced price of $47.5 million, and was soon sold for $37 million to a limited liability company named after the Russian city Novgorod.”

Example 2:
10% nominal loss over 40 years

“Steinberg’s presence at 740 was first noted in The New York Times in 1981, 12 years after he bought his 37-room duplex there for $225,000 —$25,000 less than it cost new in 1929— and then went unmentioned until 1994, the same year Kravis made noise, too, for moving to a new ballroom-equipped apartment at 625 Park, purchased for $15 million. His tenure at 740 had gone unreported until he moved out.”

– from ‘Where the Money Lives: New York Real Estate Today’, Michael Gross, Newsweek, 14 Jan 2013
—

Even in highly desirable cities, RE prices can fall.
And, coming off an historic bubble, prices can take decades to recover.
– vreaa

“I have homes in Canada and the US. I have a paper loss in Florida but still have a home.”

“I have homes in Canada and the US. Here in Florida there was a massive “correction” which led to total bankruptcy of a lot of people, huge losses by banks and a huge mess. I am not too sympathetic with people who borrow over their heads but Canada is far better off as it is than here. Fortunately both my houses were bought with cash I actually worked for and saved so I have a paper loss in Florida but still have a home. Others are not so lucky.”
– Skitty commenting at G&M, January 12, 2013 10:45 AM

This individual is not leveraged, and it seems they will be able to sit tight through any price fluctuation, if they wish.
But we know there are Canadians who have used HELOCs against their Canadian properties to buy US RE, and we wonder how many will be pushed to the brink by the very large price drops we anticipate in Canadian RE.
– vreaa

Local Realtor “Cautiously Optimistic”

“Now Andrew had a couple of questions about the Vancouver real estate market… In the media he’d been reading that the Vancouver real estate market had seen a significant drop in the last little while, and he wanted to know what the real situation was.” …
“We’ve seen a lot of changes in the economy in China, so there’s a lot less people coming over from China. We’ve also seen changes in mortgage rules which has also reduced a lot of demand for property here in Vancouver.” …
“What are my predictions for the next six months?.. Our major trading partners (US, China) have been having some issues but their economies seem to be turning the corner. So I’m cautiously optimistic. … In terms of changes to mortgage rules, they came in 3 to 4 months ago, we’re feeling the effect now, in the past after mortgage changes, you get about 3 to 6 months where things soften up, then things begin to pick up. So, you know, I’m cautiously optimistic.”
– excerpts from Mike Stewart, local realtor, self posted youtube video, 20 Nov 2012 [hat-tip Anon]

Whenever a speculative mania tops and begins its deflation, participants who don’t understand the fabric of bubbles, and who haven’t seen the mania for what it is, will search for extraneous factors to blame. Sure, some external factors may shape the path of the price descent, but the real cause for the resultant implosion is the fact of the mania.
– vreaa

Quotes from above added to the “It’s Only A Flesh Wound” sidebar post.

“I moved here a few years ago from the US; my wife is Canadian. I was astonished at the housing prices. The math never added up as to how people could afford to live here, especially with an extravagant lifestyle of toys and trips, based on known incomes and living costs.”

“I moved here a few years ago from the US; my wife is Canadian. I love living here, although the cost is a bit hard to stomach at times. I think people should feel lucky to live in such a beautiful place that offers so much opportunity; it seems a lot of people take this for granted and even feel entitled to it.
When I first came here I was astonished at the housing prices. The math never added up how people could afford to live here, especially with an extravagant lifestyle of toys and trips, based on known incomes and living costs. I realize there is a lot of wealth here, many have done very well being self-employed, but there also seems to be a lot of imaginary wealth based on debt.
The debt rate here is astonishing considering these facts, which at least in my experience differ significantly from the US:
– Here people rent out a basement suite, which is not very common in the US. The people I know who do this do not declare this income.
– Tax avoidance seems to be common here and socially acceptable, likely due to a more lax enforcement. I think this especially rings true for business, where more here are self employed.
– Income for non-technical jobs and manual labour, like retail and construction for instance, pay substantially more here. The middle and lower middle class here have higher wages which I think is awesome, whereas in the US there is really a war on the middle class.
One would think considering the above that people would have a lower debt level since their disposable income would be higher based on higher wage, less tax, and undeclared income. But that isn’t the case.
What are people’s exit strategy when they can no longer pay their debt? I find it kind of sad that people think this is sustainable, that housing can increase by 10%+ forever when wages don’t, and that real estate for most people is their retirement plan.”
– Anonymoose at VCI 15 Nov 2012 11:01am

Sitting With Equity And Eager To Use It – “They purchased the three-unit brownstone, in the up-and-coming area of Bedford-Stuyvesant, for $725K, by re-mortgaging their Vancouver house for around 80 per cent of its value.”

“Meet Rodney Hynes and Thomas Hunt, Vancouver owners of a new brownstone in Brooklyn, N.Y.
“We’d like to thank the over-priced Vancouver real estate market for making it possible,” says Mr. Hynes, dryly.
Mr. Hynes, who works for Aboriginal Affairs, bought a home on Vancouver’s east side with Mr. Hunt, a TV producer, nine years ago. They purchased the house, which needed a $200,000 renovation, for $268,000. According to a recent appraisal, it’s worth $850,000.
They purchased the three-unit brownstone, in the up-and-coming area of Bedford-Stuyvesant, for $725,000 (U.S.), by re-mortgaging their Vancouver house for around 80 per cent of its value. Because the Brooklyn property will bring in rental revenue of $7,000 U.S., their mortgage and other expenses will be more than covered.

Full disclosure: I’ve known these guys through friends and media connections for a number of years. They are a perfect example of Vancouver buyers who were initially reluctant to jump into the market, but once in, soon embraced the seemingly endless ride, as, year after year, the value of their home climbed. They were smart, or lucky enough, not to lock into a five-year rate, but instead went with a variable rate so low that they rapidly paid down a hefty chunk of their principal. It meant they were sitting with a lot of equity, and they became eager to use it towards another purchase.

You won’t hear the Suze Ormans of the world advising consumers to mortgage one’s home to the max. Most every money expert will tell the average middle-income earner to pay down the mortgage, not borrow further on it.

Mr. Hynes and Mr. Hunt had almost paid off their Vancouver home but chose to mortgage it to the max so they could own the brownstone clear title. I spoke to a few Century 21 realtors in Vancouver and Toronto who help clients liaise with realtors south of the border, so they can work their way into the U.S. market. When I ran the idea of maxing one’s mortgage to make a U.S. purchase possible, the realtors weren’t so sure they’d personally go that far.

Mr. Hynes and Mr. Hunt say they have already endured shocked reactions from friends, of the “are you crazy?” variety. But the couple regularly travel to New York, and one day, when they’ve paid down the mortgage, they will reserve one of the small suites for themselves, as a pied-à-terre.

“Canadians are very conservative, especially around matters of money,” says Mr. Hynes.

Says Mr. Hunt: “What’s interesting is when you go to New York and you’re doing what we’re doing, you see it’s as normal as can be. There are people from all around the world purchasing real estate, and being entrepreneurial about it.

“We’re not worried.”

Mr. Hynes and Mr. Hunt aren’t alone in their quest for U.S. real estate. Overall, foreign purchases of U.S. properties have gone up 24 per cent in the last year, according to a recently released report by the American National Association of Realtors (NAR). Canadians are, by far, the greediest buyers. We account for 24 per cent of the foreign sales stateside in the last year. Meanwhile, the second-biggest buyer, China, is responsible for 11 per cent of sales. Toronto realtor Paul Indrigo said he relies on such stats to help Canadians find properties in popular hot spots in Florida, California and Arizona.

But it’s not a straightforward process, purchasing an American investment or holiday property that’s nowhere close to home.

If Mr. Hynes and Mr. Hunt want to renovate, which they do, their property management company will have to hire contractors. To do the work themselves would require a work visa. As well, non-residents of the U.S. are expected to pay a 30 per cent withholding tax on gross rental income – unless, of course, they find an accountant who can help them file the forms that will save them from having to take such a hit. Fortunately, there are local accounting firms who’ve become expert in U.S. tax laws and one of them, a Surrey firm, helped guide the way for Mr. Hynes and Mr. Hunt.

“There will be challenges every step of the way,” says Mr. Hunt. “Taxes are huge. Expenses are really high. Insurance is high. Water has to be paid for separately. We have to budget for maintenance.”

And the vacancy rate isn’t the same as Vancouver, adds Mr. Hynes. In an up-and-coming neighbourhood like Bed-Stuy, they say demand is so much lower that people might not show up for an open house on a rainy day.

However, compared to Vancouver, the New York market is a breeze, says Mr. Hunt.

“We spent two years looking for a house in Vancouver, and the fact that we survived a sellers’ market here meant we didn’t freak out about the New York purchase.

“The market in Vancouver was way more intense.”

– ‘Going all in: Canucks max out their mortgage to buy in Brooklyn’ Kerry Gold, The Globe and Mail, Oct. 19 2012 [hat-tip Jack]

So, this couple paid $468K ($268K purchase, plus $200K renos) for a house that now has an appraised value of $850K.
This means they could have liquidated their RE for a profit of about $382K (minus commissions and fees etc).
Instead of doing that, or of being content with having a paid off home in desirable Vancouver, they decide to go ‘all-in’ real estate, with leverage.
They borrow 80% of the current value of the East side property ($680K), and purchase the $725K US property.
Thus, by our very rough math:
Value of RE carried:
East side $850K + Brownstone $725K = $1.575M
Mortgages:
Eastside $680K + Brownstone $45K = $725K
(Is it also fair to assume that, because this couple paid down their mortgage rapidly, and because they required a 80% HELOC to purchase the US property, that they don’t have much else in the way of savings/investments?)
Thus they are very likely leveraged RE:net-worth at about 2:1.
Overall, this looks like a situation where a household is overextended into RE and very vulnerable to RE weakness ahead.
On their side, they likely purchased the US property at a reasonable value, and it is currently cash-flow-positive.
The US housing market may have bottomed, but quite possibly not; the Vancouver RE market has only now begun to descend.
– vreaa

“Just came back from Portland, Oregon. One heck of a beautiful place. $250K-$300K for a lovely home. Drive up to Vancouver, pay 5x more for a house. Makes perfect sense, right?”

“Just came back from Oregon. Portland is one heck of a beautiful place.
Houses? $250-$300 for lovely home.
Coast. Fishing. Skiing. Hiking. Hunting. Motorcycling. All close. Drive south to CA for beach long weekends. Drive up to Vancouver, pay 5x more for a house. Makes perfect sense, right?”
– Sebee at greaterfool.ca 16 Oct 2012 1:03pm

“How is it Seattle, just 3 hours away, can produce the people and capital to create and run such great engines of capitalism, but in Vancouver all you have are greedy rats flipping their homes and telling themselves it’s the best place on Earth?”

“I just looked at a beautiful 580 sq foot first floor studio in Seattle’s Capitol Hill, about a 10 minute walk to downtown, for $179,000 dollars.
Here in Seattle there is Boeing, Microsoft, Amazon, Costco, Jones Soda, Starbucks and a company that every real estate board in Canada would prefer that you never ever ever know exists, namely zillow.com.
All of these companies were founded in Seattle. There are dozens of others that have their US base here like Nintendo, Expedia and Holland America Line.
How is it Seattle, just 3 hours away from Vancouver, can produce the people and capital to create and run such great engines of capitalism and in Vancouver its like greedy rats flipping their homes and telling themselves its the best place on Earth?
My reading of the situation is simply that the level of cognitive dissonance and delusion is just absolutely beyond comprehension.
Please Vancouver, explain yourself. Actually, never mind: the market and its natural forces will deliver the explanation to you in a hurricane like catastrophe soon enough.”
– Bob at VREAA 6 Oct 2012 at 5:59pm and 6:07pm

It is fair to compare Vancouver RE with that in Seattle, and we come up sorely overpriced.
– vreaa

Robert Shiller – “People get excited about housing. They get excited about Vancouver. You’ve got to get it straight. Just because Vancouver is a nice place to live, doesn’t mean that prices are going to go up there forever.”

“It’s looking like the bubble is still alive in Canada.” …

“It looks like Vancouver is San Francisco lagged some three years… San Francisco is a bubble city, it’s one of the main boom cities in the US… Californians are known for that, they’re emotional people (laughs)… But they’re no different in Vancouver.. in fact it’s worse in Vancouver… I have Vancouver doubling, even correcting for inflation, in 22 years.. that’s bigger than San Francisco. So it makes you wonder.. where is Vancouver going now? I’ll tell you one thing, I’m not investing in Vancouver real estate (laughs), not me!” …

[Interviewer: Is the issue the prices, or is the issue the affordability?]
“I’d say the issue was sociology. Economists are getting back to that very belatedly. It’s about how culture changes and how people get excited about housing. They get excited about Vancouver, it’s a beautiful city, by the way… it’s a nice place to live. But you’ve got to get it straight: Just because it’s a nice place to live, doesn’t mean that prices are just going to go up there forever…. when they get sufficiently high, people are going to say: You know, I’m not going to do it… and that’s when it breaks.” …

“Glamour cities are more bubble prone than run of the mill cities… if you have celebrities living there.. if people go there on vacation tours… that’s where the psychology brings on bubbles.” …

“I’m not giving you a strong forecast… I don’t know what these cities could do… they could keep going up. I really don’t know.”

– excerpts from interview with Robert Shiller, BNN, 6 Sep 2012 [hat-tip G]

“There are over 5,000 homes in Vancouver for sale for over $1 million. In comparison, in April, just over 7,000 homes sold in the entire US (135 times the population) for over $1 million.”

“There are currently over 5,000 homes in Vancouver metro area for sale for over $1 million according to MLS.ca. In comparison, the NAR reports that in April, just over 7,000 homes sold in the entire US were sold for over $1 million. And this despite the fact that the US population is 135X greater than the metro Vancouver market, the average personal disposable income in the US is 20% higher than the Vancouver average ($37,100 vs. $30,800) while US per capita GDP is higher than the average for all of BC.”
– from Vancouver housing in full correction mode: Implications for Canadian banks, Ben Rabidoux, The Economic Analyst, 3 Aug 2012

Truly remarkable. Thanks to Ben for that insight.
– vreaa

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

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

David Rosenberg Sees More Downside For US RE

“How can it possibly be that the US housing market is showing a durable recovery when it is still taking a median of eight months for the builders to find a buyer upon completion of the unit? Up until April 2008 – in the midst of the Great Recession – a number this high was unheard-of, having happened but once previously and that was the peak of the previous housing market meltdown in June 1991.”
– David Rosenberg, 26 Jul 2012
—

We agree with Rosenberg.
Our own estimation is that US RE markets have at least 20% more downside.
In Vancouver, our downside risk is still of the order of 50%-66%.
– vreaa

David Rosenberg’s Stunning Canada vs US RE Charts – “Canadian housing prices are not sustainable, my friends.”

As the U.S. begins to recover from its housing bubble, concerns have been escalating about a housing bubble in Canada.
“Canada is carving out a top, while the United States is seemingly carving out a bottom,” writes Gluskin Sheff economist David Rosenberg.
Using three charts, Rosenberg points out the stark differences in the Canadian and U.S. housing market and the existence of a possible Canadian housing bubble.

Chart 1. The ratio of Canadian housing starts to U.S. starts is now 0.3x:

Chart 2. Canadian home prices are on average twice the level of home prices in the U.S.:

Historically, average home prices had been close to parity.
Rosenberg asks, “which of the two do you think is going to correct relative to the other?”

Charts 3 & 4. Vancouver & Toronto home prices relative to U.S. home prices:

Vancouver’s home prices are down 12% from year-ago peak levels but still average $733,000. Toronto’s average is about $517,000.
“Not sustainable, my friends,” writes Rosenberg.

– from ‘Canadian housing prices are not sustainable: David Rosenberg’, Financial Post, 11 Jul 2012 [hat-tip pennysaver]
—

Spend some time with these charts and you’ll see why our own call for Vancouver prices to fall 50%-66%, peak to trough, is fairly pedestrian.
By the way, we suspect that US home prices haven’t yet bottomed, and have about another 20% to go.
– vreaa

Whistler Hilton Blowout Sale – Looks like some American from New Jersey has defaulted and foreclosed on something like 40 units at the Hilton in Whistler.

“Anyone know what’s going on with all the HSBC foreclosure sales at the Hilton in Whistler? Looks like some American from New Jersey has defaulted and foreclosed on something like 40 units. Ouch. They are blowing them out however so you’re seeing the Whistler stats spike a bit on volume.”
– ZRH2YVR at VCI 8 Jul 2012 11:06am

“I was a RE agent in Los Angeles when the market crashed circa 1987. Here’s a brief true story of riding the market down.”

“I was a RE agent in Los Angeles when the market crashed circa 1987. I had a listing with a seller who had a well-kept home but essentially unchanged since it was built in 1962. She was a widow who had bought the house with her husband for about $50,000 new. She wanted to list for $650,000 which was about $50,000 over the comparables. I could only get her down $10,000. She was sure the house would get her asking and more.
The crash seemed to happen overnight although, of course, it had been building for a while.
A week later we got an offer for $590K. I advised taking it and got a tongue lashing from her boyfriend. He accused me of wanting to rob her of $50K.
This scenario played out several more times. Each time I managed to get her to lower her asking but never by enough. We became mutually frustrated with each other and I willingly gave up the listing.
Months later she sold her house. She got $390K. That was $200K cash she lost out on by “refusing” to sell.
How many Vancouverites afflicted with the same resistance to selling for a good margin will make the same mistake? More than don’t I wager.”
– Patz at VREAA 5 July 2012 10:15pm

“I was living in San Diego in 2007 when the market had just started to fall. Once it starts, it is very hard to stop.”

“I was living in San Diego in 2007 when the market had just started to fall. Everyone said it was the best time to buy in years (I didn’t). A small home was going for around $1M. Within 2 years prices had fallen another 35-50%. Those in the most expensive homes said luxury houses wouldn’t drop, there were always wealthy buyers around; there weren’t.
You can now buy a home in SoCal for far less than in Vancouver, in 2007 it was the reverse. Many who bought for investment were wiped out, a lot were real estate agents caught in the downdraught.
Investors here won’t buy now if prices are going to drop, the smart ones are unloading already. All of this adds up to a spiraling drop in prices, same as the increases we’ve seen over 12 years.
It’s been stated Canadian (not Vancouver) prices will drop 15%. In the most overpriced Canadian market, we’re sure to drop by a lot more than 15%… my guess is prices will drop at least 30%. Once it starts, it is very hard to stop.”
– herewegoagain at vancouversun.com 22 Jun 2012 10:25pm

Edward Glaeser – The Benefits Of Modest Housing Prices – “There is plenty to like in low and stable housing prices, and that’s what we should now expect in a world free from bubbly delusions of constant price appreciation.”

“…the seasonally adjusted figures illustrate that since March 2009, we in the US have been bumping along the bottom of the housing market, just as we did for six years after the last housing bubble burst in 1991.
Although a new surge in housing prices might improve the macroeconomy, there is plenty to like in low and stable housing prices, and that’s what we should now expect in a world free from bubbly delusions of constant price appreciation.” …

“Homeowners, like myself, have lost from the drop in prices, But homebuyers have benefited an equal and offsetting amount.
Cheap homes make it easier for young families to buy. Given that our public policies tend to be rigged against the young, who will have to pay the cost for our current deficit and extraordinary spending on Medicare, I can’t begrudge them the benefit of lower housing prices.
In the long run, we should expect to see prices stay low in most of the U.S. We have an abundance of land. The U.S Census reports that there were 117 million households in 2010. So every U.S. household could have more than an acre of land and we’d all still fit into Texas.” …

“I hope that housing prices continue to be modest for decades so that ordinary Americans can afford to buy, and I see little good in government policies, like the homebuyer tax credit, intended to artificially boost housing prices.
My greatest hope, however, is that prospective buyers have learned the lesson of the past decade: Housing prices go down as well as up. The right reason to buy a home is not as an investment, but as a place to live a fulfilling life.”

– excerpts from ‘What’s Not to Like About Stable Housing Prices’, Edward Glaeser, Bloomberg News, 29 May 2012

Our thanks to ‘Zerodown’ for alerting us to this article, and who adds: “A smart, contemplative article. Even in 2006 I heard the view that expensive real estate is a drag on the real economy because it hogs capital itself and encourages capital intensive projects like trains and roads to suburbs (where people seek affordability). All this capital should be put to more productive use.”

Mancouver – “I just spent a week in Manhattan and there are a load of gorgeous studios and 1 bedrooms in the $300K to $440K price range.”

“I just spent a week in Manhattan and there are a crap load of gorgeous studios and 1 bedrooms in the $300,000 to $440,000 price range, and I’m not talking crap neighbourhoods in Manhattan, I’m talking about some very cool hoods. The condo fees are definitely higher, but include heat and air conditioning……and seriously we’re talking about N.Y, not to mention that the actual apartments are waaaaaay cooler than Vancouver’s ugly crap boxes with 8′ ceilings and “granite counters”.
So much for that stupid argument “Vancouver is cheap compared to New York and London”.
– vangrl at VCI 12 May 2012 11:04am

‘Safe As Houses’ Episode From Niall Ferguson’s ‘The Ascent of Money’

– ‘Safe As Houses’ episode from Niall Ferguson’s series, ‘The Ascent of Money’.

Watch this, if you haven’t yet done so.
Industrious readers may want to cite quotes from the episode pertinent to the current Vancouver RE market.
– vreaa

What Housing Price Crashes Really Look Like

– from ‘Australian House Prices down 10% from Peak’, Steve Keen at debt deflation.com, 1 May 2012

Show these charts to anyone still claiming that the Vancouver RE price hiccup of 2008-2009 was the popping of our bubble.
Like Australia, Vancouver is very likely at the very beginning of the process you see charted above.
– vreaa

Tale Of Two Characters – Van East and Frank Lloyd Wright

In relation to a post regarding the sale of the above Van East SFH for $1.45M, commenters were debating what constitutes a ‘character’ home. The example below care of ‘FML Listings‘ (a Toronto RE blog). We’d say this was a character home:

Thomas H. Gale House, Oak Park(West Chicago), Illinois
Architect: Frank Lloyd Wright
Built: 1892
Asking price: $1,295,000
HOUSE HISTORY: Wright’s design for this house was derived from the more expensive residence he had designed earlier in 1892 for Robert Emmond of LaGrange, Illinois. This home and its twin, the Robert Parker house, were built later that same year by Realtor Thomas Gale.
The Gale and Parker Houses are of interest for what they reveal about Wright’s development as an architect. Their irregular composition, consisting of octagonal bays joined to a rectangular core, the whole covered by high-pitched roofs with octagonal dormers, reflect the style of design of Wright’s first teacher, Joseph Silsbee. The influence of Louis Sullivan, especially his philosophy of “geometric simplification”, is seen in the taut masses of these houses, made clear when contrasted with the more ample rounded forms of true Queen Anne designs so popular at that time.
The Thomas Gale house has been completely restored and updated. A new ‘off footprint’ addition include an expanded kitchen and master bathroom, each designed to blend into Wright’s original design.
—

There you have it.
Frank Lloyd Wright in Chicago: $1.3M
Van East SFH: $1.45M
– vreaa

What Would You Pay For This House?

“This three-bedroom Craftsman was built in 1922 and retains its original hardwood floors and crown molding. The living room has a wood-burning brick fireplace.
The dining room features original hutches and shelves.
The kitchen, which opens onto a back deck, was completely renovated with the addition of new wooden cabinets and floors, lighting fixtures and stainless-steel appliances.
The master bedroom is on the main level; there are two bedrooms upstairs, where there’s also a family room that opens to a balcony.
Behind the house, there’s a sitting area with a pergola, a few garden beds and a concrete patio.”

Reveal:
The house is on the market in Seattle for $499K.
– ‘What You Get for … $499,000.’, New York Times, 29 Feb 2012; Photos
[hat-tip Vesta]

More on the property:

SIZE: 2,460 square feet
PRICE PER SQUARE FOOT: $202.85
SETTING: This house is in the North Admiral neighborhood in the western part of Seattle on a small peninsula between Elliott Bay and the Puget Sound. The architecture includes Tudors, Dutch Colonials, Victorians and Craftsmans; more contemporary houses dot nearby bluffs and have better views of the city skyline, the bay and the sound.
Three blocks away is the neighborhood’s commercial strip, California Avenue, which has bars, banks, cafes, restaurants, grocers and the Admiral Theater, a 1942 Art Deco movie theater and concert hall. Several parks are within a mile, including the 53-acre Schmitz Preserve Park with its old growth forest and walking paths, Alki Beach Park and Hamilton Viewpoint, which overlooks Elliott Bay and the city skyline.
The house is five and a half miles from downtown.
INSIDE: The two-story house was built in 1922 and renovated within the last four years. It has retained the original hardwood floors, crown molding, and built-in hutches in the dining room. On the first floor, there’s a living room with a wood-burning brick fireplace, a formal dining room, a kitchen and a master bedroom. The kitchen, which opens onto a back deck, was completely renovated with the addition of wooden cabinets and floors, lighting fixtures and stainless-steel appliances. The carpeted second floor has two bedrooms and a family room that opens to a balcony. One of the house’s dormers was finished with drywall and shelves to make a small playroom.
OUTDOOR SPACE: There’s a small fenced-in front yard. Behind the house is a sitting area with a pergola, a few garden beds and a concrete patio.

All sounds very reasonable, by Vancouver standards.
Houses like these will likely sell for even less at Seattle’s bottom, perhaps below $400K.
In Vancouver? Definitely far below the $1.5+M that such a property would now be asking on the West-side.
$500K would represent 66% off. Hmmm. That could never happen, surely?
– vreaa

Learn From The Hindsight Of Others – “Your mistake was buying a house that was overinflated by over 100% of its actual value and not seeing that housing prices can’t keep increasing 10% a year indefinitely.”

“I found a blog post through the Wall Street Journal and while the post is from mid-2011 and pretty standard, the comments from US RE victims was very interesting. Take a look at the post for a good example of fallout.”
– ‘MC’, via e-mail to VREAA, 27 Feb 2012 [Thanks, MC. -ed.]

In the article, the blogger ‘Thursday Bram’ writes: “When you purchase a house, the general rule is that you want to be sure to be in the same location for at least five years. Otherwise, financially, you’re probably going to take a hit.”

Some comments on the post:

‘houseregrets’, June 6, 2011 at 7:06 am –
“You might want to take into account the millions of people like us who bought a little starter home back in 2006 (just to get in the market– advice was to get in and build equity to sell for a bigger home). We didn’t buy at the top of what we were told we could afford, and we chose a 30 year fixed mortgage, not being persuaded into an adjustable rate. Now, two kids later, 5 years later, our house is worth $100,000+ less than what we paid, we have way outgrown this starter home. With 2 stable incomes, we aren’t approved to do a short sale and just have to live with the situation. With forecasts that the bottom hasn’t yet hit and might not for a few more years, you might want to adjust this advice to say it’s a 10+ year rule.”

‘Also bought in ’06’, June 12, 2011 at 6:03 am –
“I agree with houseregrets. We bought a modest starter home in early 2006, snagging a 3 bedroom, 1500 square foot Cape in a quiet neighborhood. Rather than doing stupid things with balloon or interest-only junk loans or maximizing our borrowing power, we calculated a comfortable payment and worked backwards to figure out our max house price. We have a 30 year fixed rate loan and got a wonderful rate. The assumption we made was that we would likely sell and move up to a bigger/better house in 5-7 years. 5 years later, comps in our town have nosedived in value. If we had to sell today, we would be lucky to get what we owe on the house (and it would take 6-12 months to sell, assuming it did). After realtors’ commissions and closing costs we’d walk away owing money. So paying our mortgage faithfully and on time for 5.5 years has gotten us zero equity, and in fact we have essentially “lost” the tens of thousands of dollars we put down on the house and have invested into improvements.”

‘Michael Henson’, October 30, 2011 at 11:14 pm –
“Not true. I bought for $300K in 2006, put $60k down, made all payments on time, and I even paid an extra $20 k on the principle. My rate is 6.5%. My house is now worth $125k, if I’m lucky. I now owe $209K. So where was my stupid mistake and overstepping my means?”

‘Pete’, January 4, 2012 at 7:59 am –
“Your stupid mistake was when you bought a house that was overinflated by over 100% of its actual value and didn’t see the writing on the wall that housing prices can’t keep increasing 10% a year indefinitely.”

Opinion; Food For Thought – “The people of this region have a near infinite capacity for diminished expectations. Personally, I’m planning to move because I want something better.”

“It may not end.  The people of this region have a near infinite capacity for diminished expectations.  They seem to always do what they are told and accept what they are given, and no matter how ridiculous it is.  They will pay more and more for less and less.  Today it’s $700k for an old basement on a busy road in hookertown.  Tomorrow it could be $1 million dollars for a tent and a license to beg in the rain.  It’s the best place on earth you know.

That’s the true value of Vancouver: chumps.  There is an inexhaustible supply of fools who will never look elsewhere and the media apparatus to direct them.  Pay $10 for a hot dog?  Lineups for days.  Why not $100?  Limited time only.  Buy now.  These people will pay anything and do anything, regardless of whether it makes sense, and that’s why Vancouver is so valuable.  It’s not the land, or the scenery, or the climate, and it’s certainly not the standard of living.  It’s the people.

You can argue from simple mathematics that eventually this must end.  The population will be unable to pay for it.  This is true, but don’t ignore the fact that so many 60 year olds have 40 year mortgages.  When the general population can wield sums of money that they have no hope of repaying the integrity of the system is lost.  Money doesn’t mean anything in Vancouver, and under current policies Canada is sure to follow.  We have socialized credit and destroyed capitalism.  Newcomers don’t own anything in Vancouver and won’t get the opportunity.  It’s like a communist country, which is maybe why HAM finds it so appealing.

As for options, with the precedent established and the trend so firmly in place, there is no reason to bet on a reversal.  In 2008 this new system cracked and the authorities handed out gobs of money to favoured groups until it was fixed and the transformation could continue.  They invited corrupt CPC officials to immigrate and launder an unprecedented amount of money through Canada.  Anyone betting on an ounce of fairness or responsibility was badly burned.

That’s it as far as I’m concerned.  The social structure in Canada is ossifying and the economic structure is in decline.  Our neighbours to the south have once again shown the way, by restoring balance to their system after only a few crazy years.  Despite this enormous cost (or actually, because of it) sensible investment opportunities exist in the United States.  That country is dynamic again.  The fact that an American dollar today buys twice as much food, twice as much house, and twice as much gas is a harbinger of things to come.  Canadians foolishly think they are better off, but Canada is going nowhere.  Trade your Canadian dollars at par while you can, and move to the US to enjoy the standard of living you expect and get the opportunities that everyone deserves.

The worst thing you could do in life isn’t buying a $700k Vancouver basement suite, it’s sitting around waiting for that to change.  It may not change, or if it does, it may take too long, or you may not like it anymore.  So you better have a plan in motion.

Personally, planning to move because I want something better, full stop.  Vancouver is just crap with a zero on the end, and Canada is grossly overrated too.  I’m 50% out of Canadian assets because I don’t think our dollar is worth what the world says it is.  I see China imploding instead of leading the world.  Their model of over-investment is near an end.  I think the next great invention will come from the United States, and the next bull market will be born there.  They have so many small companies working on the next big thing, you have no idea.  If you want opportunity, it’s there.  They have nice houses for $100,000.  Buy one and get on with life.  It doesn’t have to be perfect.  It’s as close to economic freedom as you are ever likely to get.  I am astounded that people on this website could be offered this and somehow turn it down.

Real estate and credit bubbles were the last decade, so why is Canada still mired in it?  Who even gives a shit?  In the greater world, nobody.  And nor should they care.  And nor should you.”

– rp1 at VREAA 26 Feb 2012 1:37am

“I’m American and planning a move to Canada and believe me, I’ll rent. I’ve seen this movie before. How some people keep saying that “it’s different this time” boggles the mind.”

“I’m American and planning a move to Canada and believe me, I’ll rent. I’ve seen this movie before. Record debt levels, low or zero down payments, long amortizations, prices screaming past any kind of wage growth, and absurd moral hazard conditions with the lending industry (everyone in Canada seemingly thinks that all the loans given out to people who couldn’t afford them in the US were perfectly within the rules, but that wasn’t the case, the banks just turned a blind eye and faked it during a period of “irrational exuberance”), just every factor in Canada seems to be what you’d see right before a crash.

I live in Boston, a very well protected city during the recession due to our medical, scientific, and educational economic core, and in particular, I live in a very posh area where no one defaulted and there weren’t any financial problems during the depth of the crash/recession, nevertheless, my condo at the low point was about $100K off from the high point. (My place dropped by about 1/3 at the low. EVERYONE got slammed.) If I would have sold when I saw the warning signs here (about 2007) I could have rented the exact same unit a floor above me and still be more than $30K in the black if I would have rented this entire time. When a correction hits, it hits everyone across the board and overshoot. People who think that only TO and Van will be effected are wrong. I’m planning to move to Sudbury, ON, a relatively remote place with limited economic opportunity, limited amenities, relatively low income levels, cold weather, and infrastructure problems, nevertheless, the prices there have probably doubled or more over the last five years. Just like in the US, if you give people access to cheap money, they spend it, quickly. And as to foreign investment, we had more then you do and those areas are some of the hardest hit because those foreign investors pull their money at the speed of light when things tend to go south.

I love Canada, I wouldn’t be moving there if I didn’t, but Canada has let itself go down the same path as the US and it kills me. Why so many Canadians look over to this side of the border and constantly tell themselves that they’re better is beyond me given that you keep repeating our history over and over again, be it a housing bubble, or torture, or bills which strip away privacy, or “tough on crime” legislation which has no effect other than to bankrupt the taxpayer, just on and on. How some people keep saying that “it’s different this time” boggles the mind.”

– this comment by ‘farrelli77’ at Globe and Mail 23 Feb 2012. 115-net ‘thumbs up’ at last count.

“Comparing Vancouver to NY is about the most preposterous claim I have heard in this lifetime and the next.”

“This is hilarious! As a New Yorker (professional) now at my firms offices in Toronto (till the summer) and having been to Vancouver numerous times, let me say comparing Vancouver to NY is about the most preposterous claim I have heard in this lifetime and the next. I mean despite the weather Vancity ain’t even half of what Seattle is. And trust me no way Calgary (which I also know well) even at its worst is anything approaching the abysmal city of Cleveland. Frankly, Toronto is the only city that has some semblance of NY flair, power and commercial/corporate muscle in Canada, but Montreal is truly Canada’s only international city even with the horrible weather and all. And really they have to pay better in Vancouver — I mean how can you have such house prices on the MacDonald’s salary they pay out there!? That is just criminal!”
– comment by ‘Demrep’ Feb 2012, in response to ‘The real problem with Vancouver’s outrageous house prices’, Maclean’s, 1 Jun 2011

Philadelphia Church of God Trumpets: “Falling house prices is an idea that many Canadians laugh at. Americans laughed too before America’s bubble burst.”

“You have to empathize with people in Canada who want to buy a house. In boom cities like Regina, Saskatoon, Vancouver, Calgary and Toronto house prices have inflated virtually non-stop for more than a decade.
Income growth though — what income growth?” …
“Canadians rarely seem to consider the fact that their biggest investment might (read: will probably) go down in value.
Falling house prices is an idea that many Canadians laugh at. Americans laughed too before America’s bubble burst. Now, many Americans are locked into paying mortgages on houses that are becoming worth less and less each year.” …
“In Vancouver, so many people are buying houses, second houses and investment houses, that the ratio of home prices to incomes is the highest in the English-speaking world, according to consultancy firm Demographia. The survey labeled it the second-least affordable city in the world! An average house there costs over 10.6 times the average pre-tax income. For further bubble evidence, check out this $1.2 million dump.” …
“Last month, Merrill Lynch called Canada’s housing market overvalued, oversupplied and driven by speculation.” …
“Canada’s bubble is getting close to bursting, and when it does, expect a massive economic implosion. Unemployment will soar, banks will fail or ask for bailouts, and the dollar will plunge in value. Millions of Canadians will be left paying a fixed mortgage on a rapidly depreciating asset that will destroy their financial lives.
Five years following the popping of America’s housing bubble, Canadians may be about to wish they had learned a lesson. Get your ear plugs ready.”
– from ‘Canada’s Housing Bubble Is Stretched to the Limit’, The Trumpet, 7 Feb 2012
From the website:
“The Trumpet magazine is published 10 times a year by the Philadelphia Church of God.
The Trumpet uses a single overarching criterion that sets it apart from other news sources and keeps it focused like a laser beam on what truly is important. That criterion is prophetic significance. The Trumpet seeks to show how current events are fulfilling the biblically prophesied description of the prevailing state of affairs just before the Second Coming of Jesus Christ.
The Trumpet has a long history of accurate forecasting of major global events based on this predictive model, tracing back to the beginnings of the Plain Truth magazine in 1934 under the direction of Herbert W. Armstrong. To explore these forecasts, read our booklet, called “He Was Right!—Remembering five decades of accurate forecasting by Herbert W. Armstrong.”
—

“Laugh now, but you’ll learn your lesson!”
We always knew Vancouver’s RE implosion was going to look like Armageddon, just not literally.
(BTW, as far as we know this is a first: religious prophecy meets our speculative mania.)
– vreaa

“Vancouver, this sounds pretty stressful to us. We have decided to leave you and move to Texas where my salary would be double and our living expenses would be less than half.”

“Dear Vancouver,
Happy new year!
I’ve lived here most of my life, I’m 32, married now and about the right age to buy a home and start a family.
My wife and I have been saving up for a nice 2 bedroom apartment for several years. We’ve looked at the prices and it seems too risky in terms of ending up “house poor”. We’ve been waiting and waiting for anything to change in Vancouver, but nothing has happened!
At the current state of things, after doing some calculations we envisioned a situation where we would be both forced to work (dual income) and drop our future children into daycare in order to make ends meet. Most likely we will make the payments just fine but without any retirement savings no extras for vacation, etc. Vancouver, this sounds pretty stressful to us.
So after much deliberation, we decided to leave you and move to Texas where my salary would be double and our living expenses would be less than half.
In Texas we would be able to afford a large home and still save plenty for vacation/retirement/etc and this is on only one income!!
My commute is only a 5 minute drive, the people are so friendly, it feels like the same level of friendliness as being at church everywhere I go.
The weather is great, I don’t see any junkies, at worst there is a homeless person with a sign by the highway asking for change.
I thank you Vancouver for your past accomplishments, your scenery, your skytrain lines and abundance of sushi restaurants.
Unfortunately at this time I will not be needing your services and wish you farewell.
Sincerely,
A former Vancouver resident (for more than 28 years!)”
– from formervancouverresident at vancouvercondo.info 1 Jan 2012 10:22am

House ‘A’ and House ‘B’

House ‘A’
2,000 sqft SFH, on 3,920 sqft lot
Built 1910
“..elegant living room with hardwood floors and two all-brick fireplaces with mantles. The kitchen is gorgeous with the cabinets and built-in breakfast bar. Other features include a wood fence and covered front porch. The bedrooms are outstanding with their sleek hardwood floors and baseboard trim. The bathrooms have shower-tub combinations, while one has a pedestal sink and another has a sink in the lovely wooden vanity. .. Great location to community parks, schools, restaurants…”
—

House ‘B’
2,136 sqft SFH, on 3,716 sqft lot
Built circa 1910
“..lovely home has been renovated. New paint, newer kitchen, bathrooms, wiring, plumbing, new roof, windows, water tank. Beautiful front and backyard. Steps to top schools.”
—

The reveal:
The first property is 1112 North 34th Street, Richmond VA, on the market for $130,000 ($65 per sqft)
The second property is 3043 Crown Street, Vancouver BC, on the market for $1,878,000 ($879 per sqft)
[hat-tip Ralph Cramdown for the idea for this particular comparison]

Yes, we know that Richmond VA isn’t Vancouver BC, but then $130,000 is a lot, lot, lot less than $1,878,000.
Ninety-three percent less, to be precise.
Buy 14 houses in Richmond for the price of the one in Vancouver, and still have change.
– vreaa

Shiller – “The idea that buying a home is such a great idea is just wrong. Home prices may well decline for the next 30 years, in real terms.”

Interviewer (Morgan Housel, Motley Fool): “Is that what homeowners should expect, that their house will give them a place to live, that it will keep up with inflation, and nothing else?… Is that the basic model that homeowners should think about?”
Robert Shiller: “I think it’s a reasonable first approximation to assume that home prices would just keep up with inflation… [But they can go down too, they went down for the first 50 years of the 20th century] … The idea that buying a home is such a great idea is just wrong.. They may well decline for the next 30 years .. in real terms.”
– from ‘Robert Shiller on Why Home Prices Could Fall for Several Decades’, Morgan Housel interview, Motley Fool, 23 Dec 2011
—

Shiller is describing the US market, where prices in many regions have dropped to the point that they are coming close to values as determined by fundamentals. In a market such as Vancouver’s, where we are starting with prices at 2 to 3 times fair value as determined by fundamentals such as rent, income and GDP, the chances are far and away that housing will underperform inflation over the next 30 years. Most local market participants would see that prospect as preposterous. – vreaa

Sign Of The Times – 58 Year Old Man Locks Himself Into 30 Year Mortgage

Federal Reserve Chairman Ben Bernanke, who turned 58 this week, refinanced his mortgage in September, less than two years after the last time he refinanced, according to a report in the Wall Street Journal, citing sources and public records.
Bernanke owes $672,000 on his house, about 80 percent of its appraised value. The mortgage has a 30-year term, implying that repayments are fixed and that it likely carries an interest rate of about 4 percent.
…
What we have here is a man who was approaching 58 saddling himself with a debt that will have to be paid down over 30 years, at the end of which time he will be a hopefully sturdy 87-year-old.
That is not the way in which mortgages were originally intended to be used. In the now quaint days of the 1950s and 60s, people actually took out mortgages with the idea that some day they would retire them as opposed to using them as a sort of permanent source of leverage. Typically borrowers would time their mortgages so that it would be retired shortly before they did, thus leaving them better able to cope with reduced retirement income.
In fact the Chairman is not too far off the age at which you’d expect him to be taking out a reverse mortgage, one which pays out monthly in exchange for a lump sum repayment on death.
– excerpted from ‘Bernanke’s 30-year mortgage a sign of the times’, Financial Post, 16 Dec 2011

“I have spent the last week in Phoenix and what an incredible eye opening time it has been.”

“I have spent the last week in Phoenix and what an incredible eye opening time it has been. Single family detached one story home built approx 2004, 3 bedroom, 2 bathrooms, nice area (Gilbert, AZ) approx 45-55 minute commute during rush hour to any point in Phoenix… $140,000.
Upon talking to many people and explaining what is going on in Vancouver the resounded response has been “every bubble bursts”… Luckily I’ve had the company of couples of varying ages from their mid 30s to late 60s, what an eye opener. Also was given a nice tour of Phoenix by a farmer who still owns his 20 acres that his Grandfather bought and has seen the entire area change and develop over time. I wonder if there will be an equivalent person in Vancouver to do the same in a few years…is this bubble’s skin so thick it is a balloon? I suppose when a balloon bursts the sound is much louder.”
– Aldus Huxtable, via e-mail to vreaa, 14 Dec 2011

And while we’re talking about the USA, these charts from Seattle Bubble blog, 14 Dec 2011 and 15 Dec 2011. Thanks to jesse for the links:

“Three of my friends are leaving the city, all are professionals making decent money, two of them are leaving the country, one of them is moving to another province. There is a good chance I’ll be leaving in the first half of 2012, and I’ll be selling my property when I leave.”

“Three of my friends are leaving the city. One has already left in the spring, another has left just 2 weeks ago and third is leaving in about 1 month. All 3 are professionals making decent money, 2 of them are leaving the country, one of them is moving to another province. I guess one good thing is that they create job openings for other professionals. There is a good chance I’ll be leaving the country also in the first half of 2012, and i’ll be selling my property when i leave. Not sure how this compares to overall vancouver immigration statistics but I just wanted to throw these anecdotes out there.”
– RENoob at RETalks 19 Oct 2011 3:22pm

“No offense but who cares? People leave cities all the time and more people move in. End of story.”
– vanreal at RE Talks Oct 19, 2011 3:30 pm

Anecdotes about fine young skilled educated professionals leaving are vastly over-represented by sour renters.
Anecdotes about fine young skilled educated professionals arriving are vastly under-represented by sour renters.
– eyesthebye Oct 20, 2011 6:21 am

We look to post both sorts of anecdotes here — but it’s the former type that appear in abundance. We’d like to post more of the latter, please send along any stories of “fine young skilled educated professionals arriving” (and their circumstances), and we’ll post them. – vreaa

“If your household income were $100,000, how expensive a home would you be comfortable buying?”

Results of a poll at Seattle Bubble (27 Nov 2011):

If your household income were $100,000, how expensive a home would you be comfortable buying?

• Under $150k (2%, 7 Votes)
• $150k to $199k (10%, 33 Votes)
• $200k to $299k (33%, 111 Votes)
• $300k to $399k (36%, 120 Votes)
• $400k to $499k (12%, 41 Votes)
• $500k to $599k (4%, 13 Votes)
• $600k to $699k (1%, 4 Votes)
• $700k or above (2%, 5 Votes)

Hat-tip to Jeff Murdock, for pointing out this poll. Jeff adds “This from the country where you can lock in a mortgage at <4% for 30 years, and where your interest payments are tax deductible, and from the state with no state income tax.”

In Seattle, 69% of people would feel comfortable buying a house in the $200K to $399K range with a family income of $100K.
In Vancouver, family incomes average somewhere between $73K – $83K, and the average detached bungalow sells for $820K [RBC pdf].
– ed.

“I looked for a decent house for 3 years and have given up. I am not willing to spend all my money on a tear down. Just crappy value all around.”

“I too sold my company, no I did not make near $2M, I did ok in my books and I am seriously considering putting some money into other real estate investments NOT in Vancouver. I also looked for a decent house for 3 years and have given up. I am not willing to spend all my money on a tear down. Just crappy value all around. Vancouver is nice, yes, but it also rains 8 months of the year and costs an arm and leg to do it. Central California, a little in from the coast, up in the foot-hills on a few acres… now that sounds decent.
Why does everyone stay in Vancouver if it’s so damn expensive?”
– Cali Calling at VREAA 22 Nov 2011 7:07pm

‘Mish’ Headlines Vancouver and Calls For 75% Price Crash – “$50K can now buy you a pretty decent house in some parts of the US. Do you want to see what $1,050,000 buys you in Vancouver? A house that is described as ‘livable’.”

Anyone who follows economics in cyberspace knows of Mike Shedlock’s ‘Global Economic Trend Analysis’. ‘Mish’ today [19 Nov 2011] highlights Vancouver’s bubble, quoting the following letter from ‘Terry’:
“I am beginning to believe that Canada’s housing bubble is making the US housing bubble look bush league in comparison. The worst part is Canadians are so delusional they still believe that “It is different here”. 50,000 dollars can now buy you a pretty decent house in some parts of the US, do you want to see what $1,050,000 buys you in Vancouver? A house that is described as “livable”.
Wow, million dollar mortgages which are fully insured by the tax payers of Canada are being handed out to 20 year-olds like they are candy and meanwhile our government still declares, just as the US government did before it’s house crash, that there is no housing bubble and that prices will remain stable and “affordable”. And the rest of the world still looks on and considers Canada to be a fiscally responsible, financially prudent country. Just another of many myths that get started and than repeated ad nauseam by the press without understanding the whole story.”

‘Mish’ adds:
“Housing bubble denial in Canada keeps getting louder and louder, as prices become more and more absurd.”…
“Note the alleged 6 bedrooms (3 converted from the basement) but only 2 bathrooms. Who are they kidding? Is this the happy hooker flop house?
Unfortunately, pictures like these are easy to find.
The longer this continues the bigger the crash. Look for prices on such properties to crash 75% or more. When it does, it will be no bargain.”
—

Our own prediction at VREAA is for a conservative 50%-66% off. Who is this ‘Mish’ guy, some lunatic bear?
(Actually, we can imagine 75% off for some properties.)
What do these Yanks know about markets?
– vreaa

“We have high responsibility jobs for good employers, and do well financially, but not well enough to afford what we think is reasonable for two people like us, a single family home with a yard.”

“My wife and I have good jobs in high standing professions. Between us, we have five university degrees in hard science fields (with a sixth at the doctoral level underway) all from top three Canadian universities. We have high responsibility jobs for good employers, and do well financially, but not well enough to afford what we think is reasonable for two people like us, a single family home with a yard. We are good with our money and have solid nest egg already built. We cannot justify spending 80% of our income to be able to afford a single family home anywhere within an hour of the downtown core.
We also visit Seattle regularly. In Seattle, we would both make double or more than we would here in Vancouver, with housing at half the price, and the same climate. Similar circumstances exist elsewhere in Canada. While our families are here, we want to start our family in a place where we can provide our children with opportunities, not where every last dollar goes to real estate.
To put a point on it, people like my wife and I are being groomed by our employers to take on senior leadership roles in their organizations down the road. The problem for our employers is that we won’t be here – we can’t have the family we want, along with quality of life we desire and can easily obtain elsewhere.
I look forward to leaving this real-estate obsessed burg. Unless things change, things are going to get a lot worse here before they get better.”
– Vancouver In The Rearview at VREAA 6 Nov 2011 8:06pm

“At moments during our house hunt, I felt in my gut that something wasn’t right. We’d go to open houses for $400,000 homes and see lines of couples in their late 20s waiting to get inside. I kept wondering where all the money was coming from. How did all these people make so much?”

“I felt we could afford around $350,000. We called a real estate agent named Mitch, and suddenly we were looking at houses that listed at $500,000 or more.
It felt a little crazy to be shopping for houses that cost half a million dollars, but my income was growing rapidly. Everywhere I looked, people were being rewarded for buying as much house as they could possibly afford, and then some. There was this excitement in the air, almost like static. I started to think that if I didn’t buy a house right then, I would never be able to afford one.
At moments during our house hunt, I felt in my gut that something wasn’t right. We’d go to open houses for $400,000 homes and see lines of couples in their late 20s — younger than we were — waiting to get inside. I kept wondering where all the money was coming from. How did all these people make so much?
But prices just kept rising, and when people kept buying, that made it seem safer. I knew from my work as a financial adviser that following the crowd could be costly. But like everyone else, I felt safer in a crowd.”
– from ‘How a financial professional lost his house’, Carl Richards, NYTimes 9 Nov 2011
Remarkable story, be sure to read the whole piece. Hat-tip to Ray for the link (and to many other readers for alerting us via e-mails: clearly this story resonates for many of us.) -ed.

Paul Kedrosky Features Vancouver Flip On ‘Infectious Greed’ – “Vancouver Bidding-War House? It’s Being Flipped for 78% (Annualized) Gain”

“Remember that Vancouver house that went for $2.55M ($655,000 over asking) in a 25-person bidding war last April [2011]? Well, the house is back on the market a mere six months later for an asking price of $3.5m, or an annualized 78%. (This house originally went for $531,000 in 1996.)”
– Paul Kedrosky, Infectious Greed, 28 Oct 2011

US commentators have a perspective on these things that is sorely lacking locally. – vreaa

“Once I get my PhD, I’m out of here. It’s not that the grass is greener elsewhere, it’s that the grass is greener pretty much anywhere else. The only way I lose is to convince myself that Vancouver is worth being financially crippled for.”

“Once I get my PhD, I’m out of here. It’s not that the grass is greener elsewhere, it’s that the grass is greener pretty much anywhere else. I can move to nearly any other city in Canada or the United States and find either more job opportunities that pay more in my field of expertise or about the same job opportunities with a substantially lower cost of living- sometimes both. The only way I lose is to convince myself that Vancouver is worth being financially crippled for.”
– waxmonkey at reddit.com discussion of ‘Going Going Gone’, 13 Oct 2011

Very well put. – vreaa

“We’ll move to Bellingham in the spring, where house markets are far lower. We’ll live without health care, in a country at war, with the biggest debt in history, BUT, we will be able to afford having a family.”

“My wife who’s from the states and I got married a year ago, our dream was keep living in Squamish or Vancouver where she could keep working as a nurse. We realized that we won’t ever be able to buy a house and even rent it outrageously expensive. Starting a family would be impossible if we still want to have time to play outside. So we’ve decided to move to Bellingham in the spring, where house market are way, way lower but we’ll still live in a beautiful place, without health care, in a country at war, with the biggest debt in history. BUT, we will be able to afford having a family. Thanks for squeezing the middle class out of Canada, Canada.”
– ‘Phil from Squamish’, comment, Vancouver Sun, 18 Oct 2011 10:21am

“A close friend who graduated last year as a gastro specialist from UBC, got his job offer in Eugene, Oregon. I visited for a house warming party. 8,000sqft lot, 3,400sqft house, $328K. I am considering leaving as of now, it’s too much to pay for the views, rain, and short summers.”

“A close friend who graduated last year as a gastro specialist from UBC, finally got his job offer and green card in Eugene, Oregon. I visited this September for a house warming party: 8.000 sq.ft lot, 3.400 sq. ft house built in 2008, helper suite on the main level, self contained with rear entrance (rented at $ 1.220 / month, including utilities, cable, internet), double garage, radiant heat, hrv, central air condition and vacuum. Constructed with red brick, energy star type windows, two fireplaces, gas stove, good quality laminate flooring, etc, etc. He bought it for 328.000, after bargaining for 3 months, initial asking was 375.000. The funny thing is that we are in the same field and his income is almost double of mine, of course there are things like medicare, but the cost of living is much, much lower than Vancouver, gas, groceries, utilities, etc., are all lower. Oregon is a state which is tax free, this also helps. I am considering leaving as of now, its too much to pay for the views, rain, and short summers.”
– Viorelli at VREAA 12 Oct 2011 10:45pm

“I recently gave up on Vancouver and moved to Silicon Valley. The average salary where I work is around $100k. Yet, the parking garage at work is filled with 10 year old Hondas, Volvos, etc.”

“I recently gave up on Vancouver and moved to Silicon Valley. A few things struck me as notable here. First, the average salary where I work is around $100k. This is substantially higher than the average Vancouver family income. Yet, the parking garage at work is filled with 10 year old Hondas, Volvos, and the like. Sure, the guy two cubes over has a Porsche, Ferrari, and two airplanes, but the vast majority of people aren’t flashing their money around. The concentration of new Mercedes and BMWs in Vancouver is much much higher than here. Lastly, houses here are more reasonable sizes. They average probably 1200-1400 sq feet, as opposed to the monsters in Vancouver.”
– Ex Vancouver at vancouvercondo.info October 7th, 2011 at 4:43 pm

Vancouver and Phoenix Compared – Our Speculative Mania Is Twice The Size; ‘LAS VANCAS’ Revisited

“I think Phoenix and Vancouver can’t really be compared.” – comment by ‘Homeslice’, VREAA, 2 Oct 2011

PHOENIX
2001 – 110 [Case Shiller Index; from SFH data]
2006 – 228 [peak, May 2006]; run up 108%
2011 – 100 [July 2011: 99.8]

VANCOUVER
2001 – $385K [ave detached home price, REBGV data]
2011 – $1,223K [peak, May 2011]; run up 218%
2016 – ?

‘Homeslice’ is correct, it is unfair to compare Vancouver with markets like Phoenix or Las Vegas – Our speculative mania is far WORSE than anything that happened in Phoenix or Vegas, the price run up has been TWICE as great here as it was there. – vreaa
—
‘LAS VANCAS’: Click Chart to see large version:

REBGV average nominal price chart 1977-2011, for detached, attached and apartments, overlaid with a semi-opaque insert of this Las Vegas house price chart, for the purpose of absolute price comparisons 1987-2009 (scales are the same; but there is no correction for currency exchange fluctuation).
The Vegas chart was overlaid such that the y axes were identical in absolute dollars (such that the curves could be compared/contrasted: there was no attempt to fit the curves).
The whole exercise (imperfect, because of the lack of currency fluctuation effect) was to show how small the Vegas bubble was, in absolute terms, compared to ours.
– from ‘Vegas Versus Vancouver, 1987-Present’, VREAA, 11 Mar 2011

Their Past Is Our Present – Phoenix Bull Hubris, circa 2006

In July 2006, in response to a US ‘Housing Bubble Blog’ post ‘Realistically, how overvalued are Phoenix home prices? 5%? 10%? 20%? 50%?‘ [housingpanic 21 July 2006], Greg Swann, a Realtor from Phoenix, wrote ‘21 reasons to bank on the Phoenix real estate market…‘ [bloodhoundrealty.com 21 Jul 2006].
Excerpts from Swann’s post:
“Obviously, I consider this a profoundly silly question, but to lurk among the BubbleBloggers and their seething commentariat is to acquire an education in a slice of America invisible from this side of the sewer gratings. Notwithstanding the idiotic economic analysis, which is really no worse than the static-market fallacies paraded as profundities in the pages of the Arizona Republic, these sites — and not just HousingPanic — are infested with a cult-like fever to inflict suffering — at second hand, to be sure — on people who are in fact guilty of nothing except failing to have drunk the BubbleBlogger KoolAde.”
—
“Will prices drop by the huge amounts HousingPanic and his flying monkeys seem to yearn for? This seems very unlikely.
What seems much more likely is that Phoenix will recover from the hangover of last year’s buying binge and get back to a steady rate of growth — historically 6% a year. The reason this should happen is very simple: Population growth.
Metropolitan Phoenix is a unique real estate market. While other cities experience static — or even negative — population change, The Valley of the Sun routinely adds 100,000 new residents every year. There is no reason to think this will stop — not now and not soon. The carrying capacity of Greater Phoenix is eight million souls, about 266% our present population. We will hit that number — but not until 2040 or after.”

Forgive us if we had to pinch ourselves reading this. Does this argument remind one of anything we’ve heard here recently?: “Unique” (yawn); “5% p.a. price increases”; “40,000 new residents per year”; “steady immigration growth until 2050”. Why, it’s the “ Limitless Demand Argument For Ongoing Market Strength” that we hear proposed repeatedly by Vancouver RE bulls.
Anyway, that was then, and this is now: see the ‘Bull Hubris‘ sidebar for an ongoing collection of made-in-Vancouver puffery.
– vreaa
[with hat-tip to Gord]

US Speculative Mania Aftermath – “His former house fetched less than a quarter of what Mr. Reilly owed on it. His bank sued him for the rest.”

“Joseph Reilly lost his vacation home here last year when he was out of work and stopped paying his mortgage. The bank took the house and sold it. Mr. Reilly thought that was the end of it.
In June, he learned otherwise. A phone call informed him of a court judgment against him for $192,576.71.
It turned out that at a foreclosure sale, his former house fetched less than a quarter of what Mr. Reilly owed on it. His bank sued him for the rest.
The result was a foreclosure hangover that homeowners rarely anticipate but increasingly face: a “deficiency judgment.”
Forty-one states and the District of Columbia permit lenders to sue borrowers for mortgage debt still left after a foreclosure sale. The economics of today’s battered housing market mean that lenders are doing so more and more.”
– from ‘House Is Gone but Debt Lives On’, Wall Street Journal, 1 Oct 2011
[hat-tip ams at VREAA]

“Vancouver isn’t vibrant or exciting, it’s as dead as a doornail. It isn’t a big city, a world class city or even really a city. It’s a large sleepy tourist village that wishes it matters on the world stage.”

“Downtown Vancouver isn’t vibrant or exciting, it’s as dead as a doornail. I lived in False Creek for 11 years so I know how bland and lame that town is. Dining was also bland and uninspired. Vancouverites to this day are the most arrogant closed off unworldly bunch I have ever met. Far worse than Americans, and I’m in the Southern USA now. What baffles me is that people actually pay to live there. I love living in the USA now, as a dual citizen and we’ll never go back to Canada. I couldn’t justify doing my MBA with zero real career prospects in the Vancouver ‘business district’ (laughable) and then driving up and down Broadway, Granville and Seymour thinking that bubble tea, camping, fishing and the Canucks is actually worth living there for and deluding myself in thinking it’s cosmopolitan. It isn’t a big city, a world class city or even really a city. It’s a large sleepy tourist village that wishes it matters on the world stage and the propaganda there just proves it. I hate Vancouver so much it makes my blood boil and get angry even thinking about it. I went to GNS private school in Victoria BC in Oak Bay. The lot of my old classmates either moved away to live in real cities and have real lives or went to private school and didn’t become successful at all. Canadian schools don’t seem to that much better. It’s what silly Canucks tell themselves to spite and convince themselves to the USA. No more Granville Island, no more skiing, no more small town people. A buddy of mine just become an oral surgeon, he moved to NYC to start his practice, why on earth would he choose NYC over the “best place on earth”? Maybe Vancouver isn’t on the map for educated people. Way to go Vancouver!!! the only people that live there (or want to) are aging baby boomers and the 3rd world… what a city !!!!! And one final comment, I never lived in a city like Vancouver where people pretended to be rich like they do there, what the hell kind of careers do people do there? I never figured that out. I know engineers that bag groceries at save on foods in east van, my realtor was an engineer but realized that he would never have a real career as an engineer there so in 1986 became a realtor. Vancouver is a poor city, with piss poor opportunities. I only stayed to do my MBA and watch my property values rise from when I got in during April of 2001. I cashed out to some foreign fool. I’m so happy I left.”
– Reality Check at VREAA, 18 Sep 2011 7:26am

Wow. We don’t share Reality Check’s vitriol; we at VREAA like many aspects of life in Vancouver, that is why we live here.
At the same time we acknowledge that in many ways, in many quarters (particularly amongst locals), Vancouver is simply over-rated. An unrealistic over-assessment of the city has undoubtably contributed to the speculative mania in housing prices.
– vreaa