Mid Week Update
I tried to post this last night but got a PHP error message – the result is that some of you saw these numbers in last night’s comments.
There were 494 new listings Monday and Wednesday, and 222 sales, for a sell/list of 44.93% (Yay! I’m so glad I changed the rules! The bull market is back! Just please, please don’t bring up the halcyon days of repeated 100%+ sell/lists 
)
There were 353 price changes, which is a bit of a slowdown. We were running twice as many price changes as sales for a bit there.
Inventory went through its usual month-end tumble, dropping to 18,052 in may target area (predictable in direction, but not much of a tumble, really). Over 90s hit 3,278, or 18.16%.
240 comments
Do you have the data for this graph?
http://www.robchipman.net/blog/images/2008-05AveragePriceGraph.pdf
I would like to create a “logorithmic” version.
cheers
b
(I hate being the last poster on a thread, so I’ll repost here just cause I’m that kinda guy
)
Long time reader (three iterations of Rob’s site), first time poster.
The question popped up about are people putting their money where there mouth is, here’s where I’m at :
I’m 35, bought my first house in 2000 (primary residence) in East Van for $290k, with a buisness partner bought another East Van house in 2004 for $420k (so I’m only 1/2 owner of second house).
Saw the market SKYROCKET, so decided in fall of 2006 to sell the primary house. Sold for $840k (after everything about $600k profit). I made an agreement with the new owner that I’d rent the house back, so didn’t have to move.
It’s now closing in on 2 years since I sold the primary house. I’ve invested my capital and done well, and I’m keeping one finger in the punchbowl with the 1/2 ownership of the rental house.
The owner of what was my primary residence (where I am still currently renting) has tried to sell the house twice, and both deals have fallen through. He now says he’s resigned to keeping the house, even though it’s cash flow negative because he can’t sell it for what he wants.
I’m watching the market, and am prepared to sit on cash for a couple more years to see what happens…maybe in a while if prices drop enough I’ll buy my house back and never have to move
Slanty2D:
Thanks for that story. 2 different market actors with 2 very different viewpoints and strategies. You’ve done well (can’t lose money selling at a profit); your l/l is in a little tougher, but I remember the aftermath of the ‘82 crash, and tere were lots of guys like him that just toughed it out (I’m not saying he will – he might end up losing it all, but there will be many who simply defy the market and hold on).
Meanwhile, I think is safe to say that you’re a believer. If rents and prices re-adjusted themselves over the next 3 years would you consider re-buying, or are you out of the market for good? (BTW, the sell and rent back looks like a great deal now, doesn’t it?)
Brant:
Sorry, but I don’t. I get the complete graph from the REBGV. I think the best you can do is get the average for each month, going back several years.
Slanty2d,
What is the monthly rent to old house, if you don’t mind telling us? What to know figure out how much he is bleeding every month? It must be a tiny sum, since he is not interested in selling.
Does your l/l secretly hate you? Did you tell to low ball him on rent, since he is a lame duck already and can’t fright back?
Just for something completely different, Naslund has signed a two year deal with the Rangers.
I guess him selling his house recently wasn’t just a coincidence.
Ah, like drunken sailors…
News from The Globe and Mail
The party’s over for Canadian spendthrifts
Fewer jobs, a housing market chill, soaring energy and food costs – consumers won’t be spending like ‘drunken sailors’ any more
TARA PERKINS AND KEVIN CARMICHAEL
00:00 EDT Thursday, July 03, 2008
TORONTO, OTTAWA — Canadian consumers, facing softer job creation and a chill in the housing sector, are likely to rein in the spending that has fuelled the economy, economists say.
Record energy prices and rising food costs could spook consumers into an even sharper pullback, they caution, though the situation now is not dire.
“I do think consumer spending has really only got one direction to go in this kind of environment, and that’s toward slower growth,” said Douglas Porter, deputy chief economist at Bank of Montreal, who noted that the country is coming off one of the strongest spending periods in decades.
Consumers have been having a field day in recent years thanks to strong employment, low interest rates, tax cuts and the strong Canadian dollar, Mr. Porter noted.
The booming housing market was driving demand for furniture, appliances and other big ticket items, said Craig Alexander, deputy chief economist at Toronto-Dominion Bank.
“Households have been spending almost like drunken sailors over the past couple of years, which provided critical support to the economy when the export-oriented manufacturing sector had been suffering under the weight of a strong currency and flagging U.S. demand,” TD economists wrote in a report yesterday titled Canadian Consumers to Gear Down their Spending. “The central question is whether consumers can keep tipping pints or whether a hangover is in store.”
I don’t mind talking numbers, I love numbers
So the monthly rent for the upstairs is $1400/month, the seperate 2 bedroom basement suite is $1200/month, total rent collected for the house would be $2600. The house was purchased for $840k, unknown downpayment amount.
We get the better end of the deal living upstairs, the whole house is three floors so myself and girlfriend get the top two floors (two bedrooms upstairs, main is living/dinning/computer/kitchen), loads of space for the two of us. Big property also, 50×120, so space to run the summer croquet tournaments in the back yard.
WoW:
Get used to more an more bad news for Canada’s economy. Ontario is in recession, and as far as the G&M goes, that’s the begginning and end of everything.
Do you really think consumer spending is what’s been fuelling Canada’s strong economy? As opposed to….um…those dirty pesky tar sands, for example? I think our real challenge, nationally, is that we are blessed/cursed with abundant resources, and that hampers us when it comes to making the leap from hewers of wood and drawers of water. The productivity problem that we face isn’t helped by high demand for raw resources (you know that China will sell us nice doors made out of BC Doug Fir? We can’t compete on the manufacture side, apparently, so we just sell them the wood).
Family got hammered in 1982, from somewhat middleclass wealth to over a million in the hole…luckily hard working labourer father, frugality, and building homes into the 1997 hong kong emigration period righted the ship….parents pushed education, I have lots, and that helps me out now…what I learned at a young age is that bubbles swallow up families who get obsessed with single trajectory gains, chew them up and spit them out. Oh, and also….history may not repeat itself, but it definitely rhymes…this time will be no different.
Rent is cheap. Owning is not (well, not if you bought in the past few years). Fundamentals always return. TNQ is wrong. I am right. There are clues all around us, you just have to look. Here is a hint – look at inventory and sales levels, and compare them to 365 days ago, and ask yourself, what has changed, and assuming more of the same (which is an assumption, albeit), what should happen next. Anyways, its pretty simple, just wait, watch…and enjoy.
Rob, the cost of a container shipped from China to Vancouver has pretty much tripled in the past 6 years. What does this do for the equation of shipping China our raw lumber, having them manufacture the doors (of which we will need less, given the RE changes happening), and sending them back here to consumers who fuel their spending with RE equity gains? Do you know the change in costs? I do (its not small). Now, extrapolate the rest…actually, that’s the tough part, I don’t always (not nearly) get it right, but suffice to say that times are a changin…and not for the better…but I must find a way to prosper within a changing environment….
Oil – jeez, this is unreal…new record today.
Anybody care to decipher this REBGV Press Release;
http://www.rebgv.org/MOTD/2008-06%20REBGV%20Stats%20Package.pdf
Looking at median prices on page 3, it appears to me prices have gone down in most areas on most house types from May to June. Is that right? Shouldn’t prices be going up at this time of the year?
Am I getting excited for nothing? (I am one of the passive types who slinks aobut in the background here, but rarely posts in case I make a fool of myself.
“VANCOUVER, B.C. – July 3, 2008 –Increased property listings and moderating home prices have eased the Greater Vancouver housing market into a buyer’s phase. The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver declined 42.9 per cent in June 2008 to 2,425 from the 4,244 sales recorded in June 2007.”
This is not too bad according Rob…
Rob..pls. give some spin to this news…
Slanty2D said:
“I’m 35, bought my first house in 2000 (primary residence) in East Van for $290k, ….
Saw the market SKYROCKET, so decided in fall of 2006 to sell the primary house. Sold for $840k (after everything about $600k profit).”
$840k -$290k and you made a $600K profit
why these crooks in REBGV have benchmark prices and not the average selling price as other board do?
BENCHMARK PRICE: Estimated sale price of a benchmark property. Benchmarks represent a typical property within each market.
WoW:
We’re not the big market for doors, or any other construction material, for that matter. That said, building is down continent wide, so point taken. If the can’t sell us doors we can’t sell them wood. What will we do? What will they do? Our competitiveness challenge is still there, and having raw resources remains a blessing and a curse.
What can you say about shipping costs? I suspect that the tripling of container costs isn’t the highlight of shipping price jumps. I heard some figures about break bulk that were really astounding (and touch on any of our coastal non-contaner ports, i.e., mills that used to be a forklift drive away from world markets now have to truck stuff to container ports).
Times are changing. Whether for better or worse is irrelevant. The future is where we’ll spend our time. Like you say – we have to get used to that fact and figure out how to thrive.
BOG:
What’s to decipher? Sales down just over 40% (a lot of us speculated 40%, and it came in just over . Inventory up. Well priced stuff still selling fast (we know that from the DOMs). Benchmarks declined across the board (See, WoW, told you it could happen), while average price is up (almost back to February’s peak).
Should prices always rise at this time of year? No. Look at the last page, where average prices are graphed. Mid-year often sees price drops. The traditional myth is that activity (not the same as price) jumps in spring and fall and slows in summer and winter. In any event, the causal effect of seasonality is generally over-emphasized.
Average Price
Jun-08 325,000 328,293 454,970 330,122 286,067 308,050 337,054
May-08 351,050 328,264 469,677 331,623 312,159 306,520 341,149
change -7.4% 0.0% -3.1% -0.5% -8.4% 0.5% -1.2%
Jun-07 311,166 318,620 470,319 306,117 268,424 264,343 321,614
anonymous1/xxx/don’t buy in bc:
Benchmark is one price measure offered, along with average and median. In other words, you’ve got three to choose form and interpret. If you want you can actually get the raw data (it would take some time and effort) and get medians and averages for just about any sub-category you want. After all, we live in an internet/tech age. To argue that someone (the Board) is fooling someone else (the “ediot” public) by making more information available is laughable.
then just provide the information so people can understand…
WoW – unreal meltdown in sales – I’m looking for a 50% decline (yes, this is a guess) for July and August. Realtor commissions are getting hammered. Mortgage brokers are getting hammered. And this is, arguably, early days.
Dudes…this is incredibly bearish…how will MSM spin this tomorrow? How will realtors spin this to buyers? lovin it.
Seems to me things are heating up again.
Sale up 46.2% in Newwestminster.
Rob: You mentioned China, perhaps you should do some research before posting. Do you know how little we exported to China last year?
I’ll give you a hint- a drop in the bucket.
RE Bull
Isn’t it a bit of a stretch to surmise that things are heating up based on New Westminster’s sales being up, almost in isolation, when overall REBGV sales are down over 40%?
RE Bull: didn’t New West get a whole whopping six more sales than this month last year? They went from 13 sales to 19. Yeah, that’s one hot market!
^ very hot..i wouldnt wanna touch it.
Rob – 42.9percent drop in sales – that is a clue!:))
I will be signing my agency agreement with you sooner than later the way things are going!:)
46.2% increase in sales from a record setting year is a big increase, no matter how you slice it.
But what I find more substantive is the response, and I guess this is why the host blogger has become a wimp and to placate some of the bulls he comes up with this silly prognostication of a 20% to 40% price drop.
The stats clearly point to an extremely strong market which the sellers have considerable pricing power.
In fact I challenge Rob to divulge the reasoning behind the bizarre prediction of a price drop.
The stats clearly point to an extremely strong market which the sellers have considerable pricing power.
a classic case of lies, damned lies and statistics and a bold grab at grasping at straws……
the bulls’ best case writ large…..
#27 Rocks
total rent collected for the house would be $2600. The house was purchased for $840k, unknown downpayment amount.
How much down payment doesn’t matter because you’d be getting interest on it if you didn’t use it to buy the house. That’s called opportunity cost.
Anyway, the cost of owning a house is about 6% financing and 2% taxes, etc. for a total of 8%.
So that house is costing the owner $67,200 a year, and he’s getting $31,200. That’s an operating loss of over 100% of revenue, with no prospect of improvement.
No real business person anywhere would keep pouring money into a sinkhole like that.
No real business person anywhere
your average newbie landlord is not and probably will never be a “business” person….. many are “accidental” l/ls by virtue of a poorly timed and ill thought out RE purchase
that’s life in da big city……
30,
You did not add the owners part what he should be paying to rent somewhere else and please note that#14 already proved that
Slanty2D is making stuff up . why are you picking the wrong figure to make your comment a farce?
First let some one make stuff up then some one make some more to hide garbage .hey santy2d are you an idiot?
RE Bull
You’re either an agent provocateur or an idiot.
Johnny Rent, LOL – exacty.
I AM BOG, thank you! I have not laughed so HARD in a while on this blog… awesome name.
Since I asked the question, I’ll answer for myself.
I’m a family of 5. Bought mid-2004 in Pt Grey at $790k. Sold
Sept ‘08 at 1.36M. Now sitting in bonds at 3.5%. Wife mad – no “nest”. Expecting to wait at least 2 years to move back into the market. Happy as a lark with the move as I’m likely to move from a 33′ north facing lot to a 40 to 50′ south facing lot – same house but at the same price. At least this is what I’m telling myself.
Prices….declined!:)
Another clue.
Greater Vancouver house prices drop slightly
Derrick Penner , Vancouver Sun
Published: Thursday, July 03, 2008
VANCOUVER — Lower Mainland house hunters are now in a buyers market with prices that have eased slightly off of earlier-year highs in many markets, according to the latest report from the Real Estate Board of Greater Vancouver.
The region saw 2,425 sales registered through the Multiple Listing Service in June, the board reported, a 43-per-cent decline from the same month a year ago.
At the same time, owners listed 6,546 properties, an 18 per cent increase from the same month a year ago.
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Font:****At June 30, Greater Vancouver’s inventory of unsold properties stood at 18,260, a 54-per-cent increase from a year ago.
And while so-called benchmark prices in June were still up over the same month a year ago, in many markets typical prices were down slightly from benchmark prices in May.
The Greater Vancouver benchmark price for a detached house was $765,654 in June, up 7.3 per cent from the same month a year ago, but down from the May benchmark of $771,250.
In the Fraser Valley, realtors recorded 1,418 MLS sales, a 31-per-cent decline from the same month a year ago. At the same time, 3,236 new listings hit the market, bringing the valley’s total inventory of unsold homes to 11,295, a 47-per-cent increase from the same month a year ago.
The Fraser Valley’s average detached house price hit $561,771 in June, a six per cent increase from the same month a year ago.
Tnq…pls stop screaming, I am trying to sleep.
Sorry, stepped out this evening for a whicked BBQ, just got back so have to defend my numbers now.
‘hmm…’ from post # 14 asked : “$840k -$290k and you made a $600K profit”
I bought my house for $290k. Sold for $840k. When I sold my house I had $175k left on my mortgage. I had paid $70k as a down payment. From memory realitor fees soaked up $20k when I sold the place (and my memory is sketchy at best) :
$840k – $175k – $70k – $20k = $575k
So you’re right, I’m under by roughly 5%. When I first owned the house and was a bit younger I was at one point having enough roommates so that I was actually making more money per month then my mortgage payments were. Living for free and making money on the place. That went on for a few years, so that skewed my data a bit, so I was roughing things out a bit by saying $600k profit.
Seriously, no sarcasim intended, I didn’t fill in all the details so that was my bad. You were right to question the numbers. Looking back at my post I would have thought the same thing. Hope this fills in the blanks a bit…
[...] · No Comments There is always somebody on the other side of the deal, as this example from Slanty2D at Rob Chipman’s blog July.03.08 at 11:04am so clearly illustrates [...]
Oh, sales only fell 42.9percent, what’s the big deal? Rob still has ,buyers, watching with their hawklike eyes, so the market is still hot hot hot….jeez, you bears are a sorry lot, your just pissed because you did not buy, and now that prices are going to the MOON, all you can do is wail and gnash your teeth – its sad…if you can’t look out to the downside, then you deserve to get left behind in the dust. Tnq and I are counting our millions while you losers hang out in your hovels. Sad.
Wow: You need to think things out. Why would Jeff, Rob, and Paul, (all realtors) predict big price falls?
What is their motivation? What are their qualifications? And why are they so short on specifics?
RE Bull for ever in Vancouver
Jeff and PaulB call it srtraight. Robs just as sharp, if not more so – but he prefers to get quoted by the msm so he plays his cards accordingly, me thinks…that said, he thinks the market is going to get HAMMERED – just ask him.
So MOI is about 7 months for the GVRD and 8 months for the valley. At these levels an eyeball regression suggests MOM price decreases but in the 1/2 to 1 percent range. Real capitulation will require inventory of around 30K. So don’t plan on signing that agency agreement too soon, WoW.
Unless something causes a stampeede. Like Oil at 200, prime jumps a pc or more, or RJ makes an offer on a unit in a condo you live in
The traditional month of May real estate selling extravaganza was a bust. And yesterday we heard June was a big loser as well. The key to getting this market moving again is markedly lower prices, something like a 50% drop might do the trick, but it won’t happen that fast.
Sellers won’t budge much from their asking prices for now. They want to get out of this market with a fist-full of dollars.
Thanks Ceejay!:)
I am in no hurry at all! Moi will go to 10 months this summer, imho. Price declines (westside) of around $5,000 per month at a minimum should be the order of the day. And I should save around $4,000 monthly by renting….so all is good, now have to jack up my t4….(Have my own biz…)
WOW SAID:
“Jeff and PaulB call it srtraight. Robs just as sharp, if not more so – but he prefers to get quoted by the msm so he plays his cards accordingly, me thinks…that said, he thinks the market is going to get HAMMERED – just ask him.”
I agree – I get the sence Robert is somewhat of a politician. Specifically, I feel like Robert has to be careful of the level of honesty he provides because he can suffer negative consequences from who or what… I don’t know, yet. Robert, not only did I declare the start of the bear market on April 26th, 2008. On this July 4th declare that you will not admit that we are in a bear market even after a 10% slide in the median prices…
Don’t get me wrong – I think you are smart and offer great service and expertise. BUt, I do think you won’t make the call – you’ll just continue to report the numbers.
XOXO
Romeo
The RE association probably frowns upon realtor blogs that are bearish in nature. Since Rob has been around for a long time they probally granted him the authority to do this but with the express limitation on stirring too much shit. Rob can be cutting edge but they don’t want him to start a bearish cult. This is probably the reason that blogsters on occasions feel like your answer don’t cut it – in the sense of pure objectivity and unbiasedness of market direction and sentiment.
ugh is anyone else tired of romeojordan’s incessant ramblings? It reminds me of my ex-girlfriend who loved to talk about herself and rant about obvious things.
To Anonymous { 07.03.08 at 9:11 pm } #32 :
I refute that I’m an Idiot…with just one RE deal I cleared roughly $600k, and I’ve still got my finger inthe RE punchbowl by hanging onto 1/2 of a property which is 100% cashflow positive (even though it’s under-rented for this market the rent covers mortgage/taxes/insurance, I’ve had the same tenants since we purchased the house so rent hasn’t increased much in the last couple years and they are great tenants).
My investments have now allowed me to be semi-retired. I sat down at one point earlier this year and calculated how much I worked on average in 2007. Came out to 22 hrs / week. Some weeks I work more, so less. This week for example I worked…let me think…7 hours. Kinda bad example cause a holiday fell in this week, but you get my drift. Previous week was 14 hours. Week before that was also 14 hours…
If working roughly 20 hours a week and having the ability to purchase anything I want at anytime (except for a house in Van right now, I ain’t no fool!), then good sir, you have the honor of calling me an Idiot
RE Bull:
I mentioned sending wood to China and buying finished doors from them. That’s accurate. I hardly said that we export a ton to China. You might try to take issue with something someone actually says.
Reasoning for a 20%-40% price drop? 1) the market will change because it always does, 2) current prices are unsupportable 3)prices are sticky on the way down 4) we are experiencing a lot more inflation than is admitted. Put the four things into the computer and it comes back with a pinpoint 20%-40% correction. Compare that to “the classic textbook scenario for all bubbles, starting with the tulip bubble”. The fact is that both crystal balls are cracked. What you can’t say, once you admit that I’ve predicted a 20%-40% correction (sooner than later) is that I’m an unrelenting cheerleader (although I suspect you’re still in the doubtful camp on that score). In any event, you seem to be taking issue with the voices in your head rather than what people actually say or write.
WoW:
“42.9percent drop in sales – that is a clue!:))”
The real issue is prices. Benchmarks are down, and a lot of medians are down, but average is up. In other words, prices have still not really responded to the “incredidibly bearish” signals that some observers set great store by. We could see further drops in sales volumes, but until we see price drops we won’t see a substantive change in the market (just ask yourself if you agree with Mr. Watt or Mr. Penner that we’re in a buyer’s market).
And I have to ask: what does this mean? “And while so-called benchmark prices in June were still up over the same month a year ago, in many markets typical prices were down slightly from benchmark prices in May”. Is there any kind of serious argument that prices now are lower than they were a year ago? Why the use of “so-called”?
I don’t think the market will be “hammered”, as in, more than 40%. One thing that guys like you and RJ are ignoring, I think, are examples like RJ’s Lions listing. The increased inventory is not made up exclusively of highly motivated sellers. You can’t argue that sales are down, but you also can’t argue that prices have fallen, despite close to 6 months of slowing sales and increasing inventory. How do you explain that? I think you have to start by taking inventory levels with a grain of salt. ceejay, I think, is on the right track. 6-7 moi isn’t brutal. In many markets its the norm.
RJ:
I’ve long said that “bull” and “bear” aren’t really good terms for the real estate market. I’ve also asked for clarification, many times, about what qualifies as a burst – lower volumes, lower prices, or both. There are seldom complete answers. So, I’m unlikely to ever call the market bullish or bearish. However, I will pass judgement on when its time to sell or buy (broadly speaking, given that trades have to be judged individually). 10% off median prices may be a bear market for you, but unless we see big moves in rents or mortgage rates drop to 1% it won’t be a signal to buy.
Commenting on real estate in public is a difficult task. Its easy to pontificate from the safety of anonymity, so I don’t do that. I’d rather back up my statements. I can’t remember many people really being able to seriously dispute anything I’ve really said. They tend, rather like Real Estate Bull, to dispute things I haven’t said or simply pass negative judgement on my position without explaining their own.
I do have to be careful about what I say, but its not because of the negative consequences that I think you envision. Someone linked to a Realtors blog here not long ago, pointing out the unrealistic claims that he made about the future of this market (something to the effect that 2008 was going to be a great year for price gains). I don’t want to wear those kind of claims, because a lot pf people read this blog, and most of them are smart and have memories.
I’ve been contacted exactly once by someone from the Board, and it was in an unofficial capacity. The individual is a blog reader and was offering some technical advice. The Board doesn’t care what I write as long as I don’t break any laws. Nobody “grants” me authority to do anything. I’m a self-employed capitalist in a free country.
I think you’re confusing “objectivity” with “conformity”. I don’t put as much store on things that you may consider critical, but that’s not unobjective. I’ve said we haven’t seen price drops (we haven’t, really) but I expect a 20%-40% correction sooner rather than later. That’s based on looking at current data (we haven’t seen a lot of price drops), buyer and seller behaviour up close, and the fact that current prices are out of whack with fundamentals (and have been for some time). How is that unobjective?
If I may turn the tables for a moment, you’ve recently ahd a problem with a seller who isn’t listed at a price that you think reflects the market. I agree with you on the price, by and large, but see it as a common characteristic of a type of seller that makes up part of our market (a pretty objective assesement – the seller does what he does as a result of his particular motivations). You conclude that he or the Realtor are behaving improperly. Which one of us is being subjective?
Yes, Anon 48, RJ is desperately seeking validation from others.
Slanty2D:
Just because you made a few bucks as a result of taking action and making the right moves doesn’t mean you’re not an idiot. If nothing else, this blog has got to teach you that profitting through real estate investment is not an objective measure of real estate knowledge. Any fool can semi-retire and enjoy life. It takes real intelligence to see what’s happening.
lurker,
i’m desperately seeking a one bedroom in lions for 266K. North East facing with less than 5% mortgage rate.
Rob, in that case, I wish I was more a fool lol.
I could use some semi retirement these days…
“What you can’t say, once you admit that I’ve predicted a 20%-40% correction (sooner than later) ”
Rob, are you saying that if prices went up another 20% you would STILL be predicting only a 20%-40% drop?
RC,
I completely agree. Most of the time I’m an Idiot….sometimes I get lucky. I got lucky this time.
I’m hoping to continue pushing my luck a bit by waiting before diving back into the Vancouver RE market. A few years of renting hasn’t hurt me so far, and a few more years of renting will hopefully see a drop in the market. We’ll see. I am excited by recent trends…but as has been reiterated many times here, RE takes time to drift into different waters.
I’m patient…
It takes real intelligence to see what’s happening.
I think it is more about luck
It’s kind of like the fund managers. You can be brilliant when you are right, but strangely enough, a different set of people are right every few years!
Kind of like the bulls and bears. Bears have been wrong for a few years, bulls will probably be wrong for a few years. Neither show particular aptitude for predicting the markets over the long term. Certainly not if timing is the issue.
–
Anyway, I went to have my hair cut this morning. As I was sitting and waiting, I picked up one of those real estate magazines. I was flipping through, I read about how sales had slowed and the market was in a lull. I was quite excited about this kind of reporting.
Course, I then realised that it was from EO 2006. Yeesh.
RE Bull is one of our regular bears trying (not very subtly) to provoke Rob into making bearish arguments.
No real business person anywhere would keep pouring money into a sinkhole like that.
Well, there are more issues than that to see if it is worthwhile, but the bottom line is that he’s probably netting something like 1800 from the property (maintenance and taxes being about $9600 a year.) That means he is earning 2.6% on his money.
Whether he borrowed or not is generally irrelevent in my books, but either way, that kind of return is horrific. I’d say a return of anything less than 5% or so is probably a bad buy for a residence, and you want more than that for an investment. In Vancouver, that is, and regardless of the market. Once you dip below that, renting becomes a viable option.
In his case, that means a 50% haircut would make it feasible, IMO, to buy… or, IOW, I would consider renting up to about twice that price before buying the same place. (It gets fuzzy as it gets over 4%, due to location, financing, alternatives… but rule of thumb wise, that’s my view.)
in the spirit of coco eet al:
http://tinyurl.com/5aj4za
You’re better off putting your boring old mortgage money into a fancy vacation fund.
TD bank fubar
http://tinyurl.com/6n2tpd
The bank blamed “an individual who is no longer with the company”
there goes another potential home owner……
Bulls or Bears. I seriously doubt anybody is one of the other all the time. I am a Bull when a bullish stance is called for and a Bear when a bearish stance is called for. Sales numbers indicate there are few Bulls right now in RE. So aside from preaching to nobody, is this just a circle jerk?
jesse:
You’ve nailed the limitation of what I’m saying. After all, how can I answer “no” to you? I was calling for a 20%-40% correction more than a year ago. Since then the market went up, but I haven’t revised the correction call upwards. What gives? Simple: I don’t possess the insight to nail the amount of correction, even though I’m sure we’ll see one, so I settle for getting into the neighbourhood. It is, after all, not much more than a guess. (My inability to predict the future binds me more and more to a couple basic assumptions combined with metrics). 20%-40% is a big range, mind you, and do we measure it on median, average or benchmark? What we do know, for certain, is that it doesn’t make sense to buy rental property now. It may make sense to sell, and it may make sense to wait and see.
If we could take inflation and interest rates out of the equation, and the effects of globalization (specifically China/India growth and US economic challenges) I guess we could get a better number because we’d be able to dial in fundamentals. However, just look how rents have moved in the apst while. Do we really know where they will be in a year and what effect they’ll have?
Slanty2D/Spectralshift:
You’re both right. Its completely luck. Its luck that makes you think “I better buy this place and take this risk, because looking at the numbers it makes sense. If things go wrong my exposure is minimal, and if things go the other way my upside is unbelievable. Clearly, taking action on that basis is nothing more than pure dumb luck”.
Same as winning at cards is just luck. Strangely, some people are luckier than others.
Seriously, I don’t think fund managers are a good comparison. Buying real estate when the metrics say its a good move isn’t the same as being in a stock market running a fund day in day out, regardless of metrics. I don’t have to buy investments or sell investments for my clients on a daily basis, and I don’t have to do it myself for my own stuff. Fund managers don’t have the same option. They can look for different opportunities, but they need to do something. Real estate holders can simply wait things out. It happens all the time.
Can you really argue that buying something good in a vibrant metropolitan area that cash flows at 25% down, and then seeing it pay off is just luck? Everyone who did that won. Pretty widespread luck.
Spectralshift:
“Whether he borrowed or not is generally irrelevent in my books…”
Hard to maintain that its irrelevant if you’re going to factor it in when it comes to returns (and you have to do that). A subjective advantage of real estate is that you can make the investment on the basis of the DP being money you can afford to lose, and then walk away. You forget, on a daily basis, about opportunity cost. Your brother, the equity investor, and your cusin, the merchant, never do that, but its a subjective advantage that appeals only to some. I, for instance, don’t care about what the $17,000 I used to buy one apartment could have done for me had I put it in Google. I’m satisfied with the performance of the property and I leave it at that. If we really crunch the numbers I’ll get good marks, but the original goal was a good rental and long term, low risk cash flow, which is why I chose RE and not Google. Still, I need to factor in the return on DP (and other things) if I’m ever going to make a case to someone like you that RE is a good investment.
The DP’s flipside, the mortgage, and its result, leverage, are critical to RE investing. same property bought two different ways goves different returns, right?
“I’d say a return of anything less than 5% or so is probably a bad buy for a residence…”
You may not have heard me say this, but I really don’t like to consider the principal residence as an investment. The gains are seldom real unless you’re leaving the market. I could rent where I live for way less than it costs. I pay a premium to own. It isn’t often in Vancouver that owning quality property is cheaper than renting.
“It isn’t often in Vancouver that owning quality property is cheaper than renting.”
Accepting that, how often is it within spitting distance? If I rent now for $2000/mo is it reasonable to expect to buy the same house for $2400/mo payment (25% dn, 6%, before taxes etc.)? I’m willing to pay that kind of premium but those numbers represent an approximate 50% drop from today’s value (1M->500k).
“It isn’t often in Vancouver that owning quality property is cheaper than renting.”
Good point including “quality” in your statement. I would say that renting a property of comparable “quality” is more expensive than some of the comparisons often used on this and other blogs. In the extreme, don’t compare a fully renovated and updated house to a bare-bones maintained place rented right next door. The nice place would obviously rent for more $.
The argument that landlords need to make money by charging a premium to rent over a purchasing a truly comparable apples-apples property is pretty solid.
Quotes Lurker…
Bulls or Bears. I seriously doubt anybody is one of the other all the time. I am a Bull when a bullish stance is called for and a Bear when a bearish stance is called for. Sales numbers indicate there are few Bulls right now in RE. So aside from preaching to nobody, is this just a circle jerk?
I’ll very very honest with you sir/madame. I will bearish until the market comes down to where I buy in then I’ll be waving my “BULL” flag all the way to the bank….
I don’t have a lot of time, but a quick thought on ‘luck’ that RC was talking about.
When I was putting my house on the market two years ago, I put it on for $790k hoping to start a bidding war. There was one, about 5 people came to the table, the winning bid was $810k.
I was thinking “Freakin YEAH! $810k is awesome!”
The guy pulled out of the deal the next day.
So re-listed the place at $810k thinking that if one person wanted it at that price maybe more would.
Another bidding war, sold the place for $840k.
Basically upped my income on the sale by $30k because the first guy walked away after a done deal.
I don’t know if that’s luck, but I’d certainly consider it fortunate…
Hi guys:
I have a question. I read an article in the NYT a while ago saying Vancouver has one of the most undervalued rental markets in the world, compared to owning, and a friend and I are trying to figure out whether that’s true for him. He used to rent a suite at 1212 Howe and a few months ago, was contacted by the marketing company selling that building who offered him “his” suite for sale. We don’t know what it actually sold for though, so can’t figure out the numbers. So:
1. Anyone know how we can find out what suite 304 sold for (at 1212 Howe)? Several suites are still listed for sale, but not this one, so we’re assuming it’s sold.
2. He paid $695 a month for rent for that suite. If he put 5% down (once we’ve figured out what it sold for) can anyone help me figure out what the monthly mortgage + property tax would be?
3. Anyone know an approx “closing cost” on a property like that, so we can factor that in too?
Thanks so much!!
Hey Rob — be careful not to diss consumer spending…..it respresents 2/3 of the canadian and US economies…… when consumers turtle, the economy tanks……
Jeff – your pretty objective – do you see prices rising, falling or staying about the same over the summer?
thanks. You’ve been bang on.
If I can save $6,000 per month from price declines, and $4,000 a month from renting vs. owning, then this $10,000 clear per month should save me about $360,000 cash over the next 36 months…hmm, that seems a little light….I think the downtrend ACCELERATES from here. Yes, that is more like it.
Good times.
Why don’t we move them up here to slave away in the tar sands?
Breaking News from The Globe and Mail
‘If there’s no recession, someone forgot to tell the labour market’
The United States has the look and feel of a country in recession as job losses, high gas prices, tumbling home values, tight credit and a stock market rout bite ordinary Americans
BARRIE McKENNA
Thursday, July 03, 2008
WASHINGTON — Forget the technical definition. The United States has the look and feel of a country in recession as job losses, high gas prices, tumbling home values, tight credit and a stock market rout bite ordinary Americans.
Another 62,000 jobs vanished in June – the sixth consecutive month of job losses, according to a U.S. Labour Department report Thursday.
Don’t worry – that ray of light is going to turn into a flood of sunshine for waiters (not long-term renters, but future buyers who now rent, like moi)…Love Cameron Muir’s comments…looking forward to watching him eat them as the months tick by…
House hunters see a slender ray of light
Prices ease slightly as unsold properties are up by 54 per cent over ‘07
Derrick Penner, Vancouver Sun
Published: Friday, July 04, 2008
Lower Mainland house hunters are now in a buyer’s market with prices that have eased slightly off of earlier-year highs, according to the latest report from the Real Estate Board of Greater Vancouver.
The region saw 2,425 sales registered through the Multiple Listing Service in June, the board reported, a 43-per-cent decline from the same month a year ago.
At the same time, owners listed 6,546 properties, an 18-per-cent increase from the same month a year ago. On June 30, Greater Vancouver’s inventory of unsold properties stood at 18,260, a 54-per-cent increase from a year ago.
And while so-called benchmark prices in June were still up over the same month a year ago, in many markets typical prices were down slightly from benchmark prices in May.
The Greater Vancouver benchmark price for a detached house was $765,654 in June, up 7.3 per cent from the same month a year ago, but down from the May benchmark of $771,250.
“When a market is in buyer’s market conditions, there is little upward pressure on home prices,” which is reflected in those May-to-June changes Cameron Muir, chief economist for the B.C. Real Estate Association said in an interview.
However, Muir doesn’t see any factors that would drive prices down.
Consumer confidence is lower than it was a year ago and Vancouver’s high prices have squeezed some buyers out of the market, Muir said, but the region’s overall economy remains strong with solid job creation and positive levels of population migration.
“There is no indication, at this point, of any kind of substantial decline in prices,” he added.
Dave Watt, president of the Real Estate Board of Greater Vancouver, said the homes that are selling are still selling relatively quickly, but the market is becoming increasingly competitive.
“The buyer sure knows about your competition, because of the power of the Internet,” Watt said. “For sellers today, you’d better know about your competition.”
Maple Ridge realtor Ron Antalek, with Re/Max Ridge Meadows, said it is the sellers who still try to set new all-time highs with their prices that are watching their properties sit.
“In general, the average [price] is reasonably stable, but not really showing any price increases,” Antalek added. “We’re seeing sale prices, in some occasions, equal to last year.”
Watt said realtors are starting to see more sellers reduce their asking prices. Fraser Valley markets also showed a slowing of sales and rising inventories that pushed the region into buyer’s territory.
Fraser Valley realtors recorded 1,418 MLS sales, a 31-per-cent decline from the same month a year ago.
At the same time, 3,236 new listings hit the market, bringing the valley’s total inventory of unsold homes to 11,295, a 47-per-cent increase from the same month a year ago.
The Fraser Valley’s average detached house price hit $561,771 in June, a six-per-cent increase from the same month a year ago.
Muir added that he expects to see some balancing out in the market as the year progresses as sellers readjust their expectations and either re-price their properties given today’s realities, or pull their listings off the market.
“Muir added that he expects to see some balancing out in the market as the year progresses as sellers readjust their expectations and either re-price their properties given today’s realities, or pull their listings off the market.”
Ah yes, pulling listings: the collective “head in the sand” technique to maintain high prices.
After doing a bit of research in zillow.com, I questioned whether a housing downturn will have any effect on those high-end West side houses.
Check out this listing in WA, near Medena, a prestigious area in Seattle.
http://www.zillow.com/HomeDetails.htm?zprop=48964105
Recently sold for 5.2M for 5k sq.feet on a 18k lot.
Also, Check out the sale history.
Sale History
04/24/2008: $5,201,750
04/12/2005: $1,300,000 *
Housing triped in 3 years and there is still buyer willing to pay such a price amid the worst housing disaster in US history. If a housing downturn has ZIP effect on the medena region in Seattle, who says that West side houses will drop in a housing downturn????
I do.
Please back up with facts that high-end houses in the Seattle region (Mercer island, Medena) has dropped amid the worst housing disaster in the US. If you can’t, tell me why Vancouver high end on West side would drop while those prestigious regions in Seattle don’t?
Big time.
whitebear — other than this one sale, about which we know little, in a market that has lagged the US bust by a couple of years, how about YOU explain why YOU think (if you do) the West Side will be immune to falling prices. Please back it up with some facts or analysis.
I do get tired of people who believe it is someone else’s job to think for them. It’s not a debating club, and no one gets points for convincing you of anything. You can read what people post and make up your own mind. If you think this one transaction in Seattle shows robust price support for the West Side of Vancouver, well, that’s your problem.
whitebear:
my favorite tactic is extrapolating a trend from a single data point…. so kudos on the Seattle find!
Or, as I like to say, the plural of ‘anecdote’ is not ‘data’.
Whitebear
VHB covered this topic off in his past blog a couple of times. His research indicated that the West Side of Vancouver fared no better than any other part of the metro area during the last four corrections. It may take a little longer for the more desireable areas of any city to correct, but ultimately they do. I have two personal experiences to confirm this. I sold a house in a desireable neighborhood on the West Side in the early early nineties. Within three years it had lost over 20%, consistent with the market overall. I sold another, larger West Side home a couple of years ago, ahead of the peak granted. That said, in checking house prices in my old immediate neighborhood I just saw two examples of houses that have dropped their asking prices more than 10% and these were priced pretty sharply to begin with. By the end of the first quarter of 2010, I fully expect that the house I sold will be worth less, perhaps considerably less, than I sold it for.
“Or, as I like to say, the plural of ‘anecdote’ is not ‘data’.”
And the single of anecdote is… oh, yeah… anecdote.
I am scared. A Real Estate Agent has told us that we will likely not be able to sell our place for what we’ve paid for. Does anyone think the market will recover in the next few year?
While I am financially (and, OK, emotionally) invested in and dependent upon a significant (>10%) correction, I continue to be fascinated by the psychology.
I’ve been talking to a financial advisor over the past six months or so, who has said:
(Late 2007) Vancouver RE prices will continue to escalate–no end in sight, maybe ever. Vancouver the most desirable place in the world etc.
(Circa March) Vancouver RE prices will stabilize, but will not decline. Vancouver the most desirable place etc.
(This week) Vancouver RE prices are “softening” but we will not see anything more than a 10% decline. Vancouver the most desirable place etc.
In all three predictions, she has displayed absolute certainty; raising the possibilities discussed on this blog are met not with derision, exactly, but a kind of authoritative rejection supported strongly by everyone else she knows in related industries. This fascinates me; she is very experienced, has seen other Vancouver RE downturns in her career, but has so far has apparently been dead wrong.
I hope to see this trend continue. But I wonder why this apparent blindness; I really don’t think she has similar blinders on with respect to the financial markets.
Doubter: the answer is right in your post. “supported strongly by everyone else she knows in related industries.“
Every `believer`she knows has made oodles and OODLES of money over the past 5 years. If she has met any non-believers, they didn`t make money. She extrapolates.
http://www.yattermatters.com
YA VHB, here freinds aren’t your regular nine to fivers!
How does she explain the average family income or how about all those positive cash flow investments she has under her belt!
Whitebear
You conveniently fail to mention that the 5.2M Seattle house was build in 2007, so the sale in 2005 was for lot value. So liar, this house didn’t triple in value in 3 years.
I think sometimes people forget how real estate is a component of the broader economy. The loose lending standards in the last decade has inflated not only real estate, but the stock market and pretty well every other asset class. So the clue as to what will happen to the real estate market can be gleaned from what is currently going on in the broader economy. In short, the world is currently going through an period of severe credit retraction. Interest rates might be relatively low still but a look at the long term bond market explains why mortgage rates are higher than the prime rate and will continue to climb. Credit is getting more expensive and difficult to get. How “desirable” a place is to live is only a minor factor. If interest rates were 17%, it wouldn’t matter how desirable Vancouver was to live in, there would not have been the ridiculous increases in real estate values over the last few years.
To the guy who made $600,000 selling his house at the right time, congratulations, but something like this is indicative of where excessive money supply will ultimately distort the value of money. There have been lots and lots of people that have made a lot of money exploiting this asset bubble. All this money floating around in the system contributes to the reason why inflation is becoming a force to be reckoned with.
What’s astonishing is the lack of awareness by the public of WHY real estate has gone up so much. The financial advisor who predicted real estate will not go down has no clue. Although we won’t be as hard hit as the states, there will be some serious carnage down the road in Canada.
doubter,
Financial advisors are a dime a dozen. As hard as it may be to believe, they rival realtors in number and are not much better informed. Naive investors placing blind confidence in some of these clowns is akin to Russian roulette.
our financial adviser from one of the big 5 banks
always parrots what their spokesperson says in public.
even to the point of saying it word for word
they never stray from the current line, even under
sharp questioning…..
you are on your own.. ..caveat emptor
Anonymous { 07.04.08 at 6:29 pm } Statement 90
“You conveniently fail to mention that the 5.2M Seattle house was build in 2007, so the sale in 2005 was for lot value. So liar, this house didn’t triple in value in 3 years.”
Thanks for the update!!
“I am scared. A Real Estate Agent has told us that we will likely not be able to sell our place for what we’ve paid for.”
So what? I can’t sell my car or computer for what I paid for them, either, and I’m not scared.
Why do you care about what you can sell the house for? You thought the house was worth the price when you bought it, didn’t you? Why would you want to sell it anyway?
Anyone who expects to sell a house in the future for a gain over the purchase price is a speculator, even if they live in it themselves.
You guys seen the latest monthly % drop on paulb’s blog?
Awesome.
Hi Crasher – yes – its wonderful to see. The price declines are pretty dramatic – but you and I (but not tnq) know that this is just the tip of the tip on the tip sitting on the tip of the tip of the iceberg.
Good times – the best is yet to come.
sitting on the tip of the tip of the iceberg.
them RE wedgies can be brutal!
Whitebear:
Owning a high end property won’t protect you from price drops. In fact, there are times when high end markets fare worse than more everyday stuff. I haven’t looked closely at West Van, but I’ve heard some brutal numbers there.
Areas that have things going for them (i.e, places where people want to be) will fare better. What’s the Westside got going for it? Poor shopping, its hard to get around, and the character of much of has changed for the worse.
(That said, JR, we’re seeing a lot of big decreses in asking prices, but not so much in sales prices. It will, I think take some time to see real change).
Jesse:
Sellers don’t pull their listings off the market to maintain high prices and defy reality. They just choose to hold rather than sell at a price they don’t like, or they choose to hold rather than sell at a price that they can’t sell at. If a property owner goes underwater equity wise, they either have to pony up the cash to clear title, get foreclosed on or hunker down and ride it out. Say what you will about Mr. Muir, a certain percentage of this market will stop trying to sell if it becomes obvious that they can’t get their price. Others will accept less, at which time their listings will also leave the market. Either way, unless some ENE occurs, inventory will be reduced (if not absorbed). Where the split ends up is what will be interesting.
Mr. Muir’s comments about a “buyers’ market seem a bit of a stretch. Dave Watt’s comment, on the other hand (” The buyer sure knows about your competition, because of the power of the Internet…[so] … sellers today, you’d better know about your competition” ) is pretty much right on. Dave will catch a lot of flak from some blog watchers simply because he’s president of the Board, but I wager it will be undeserved. He’s a quality individual.
WoW:
You’ve really got to stop going to the G&M for breaking news (“Breaking News from The Globe and Mail ‘If there’s no recession, someone forgot to tell the labour market’).
US TV ads are already selling insurance based on the theme that they’re in a recession, so prices have to be sharp. If its in ads its no longer news. Its history.
WTM:
I’m not so much trying to diss consumer spending as point out how commodities have helped us so much. Imagine we didn’t have them – where would our consumer spending be then? I think we probably agree it would be like the early 80s again.
Renter:
Anyone renting just about anything for $695/month here is getting a very good deal. Buying with 5% and using a $695 region payment will never make buying look good.
Anyway, a 7th floor unit there is listed at $343,000 for 561 Sq. ft. Taxes of $60/month, strata of $200, leaves $435 for your friend’s mortgage. That’s a $75,000 mortgage. Therefore, you either pay $268,000 down (78%) or pay a much higer mortgage, or buy for $78,947 to stay at 5% down. I guess to some that looks like rent is way undervalue. Most around here think it means prices are way over valued. However, even in the middle your friend would have to pay waaaaay more than $695 to own.
#304 does not have a reported sale on its tax record, and has no MLS records.
/dev/null:
If you want to own for 25% and get a 6% return (that’s what you’re saying, right?) I don’t think it will happen too often. I’m not following you exactly, but $2400/month is roughly minus taxes ($300-$400/month) is about $350,000. At 25% down that’ means a house for $466,000.
Take a North Van house in Lynn Valley – older, but nice street, nice house. Good to raise a family. Now sells for $900,000. You need a 50% drop in prices and no increase in rates. Likely? I don’t think so. My conclusion? You’re under-calculating the premium you pay for a nice place.
Could you do it in Maple Ridge? Sure. Nice place there now, nice street, on greenbelt, high $400s. You’re at $2400/month already, and on the street where I started. Now I don’t rent those places for $2000, but I do get $1500 for them. A correction of 20% probably accomplishes what you want.
Still, I don’t recommend looking at the return on your principal residence. I have a hard time considering it an investment in most cases (I know, irrational prejudice, but that’s me).
“Every `believer`she knows has made oodles a.nd OODLES of money over the past 5 years. ”
I dont know her, but oodles is an understatement…
If you own a condo in Downtown (DT) and want to sell it, you might run into a bit of bad luck.
MLS is only accommodating the first 500 sellers.
At realtylink-online you get this message:
“More than 500 Properties were found that match the search criteria. Only first 500 shown.”
If I were a seller I would raise holy hell with the Board over this.
So my prediction in the previous blog string was a decline of 1.5% for attached in the benchmark in June. It actually was a decline of 0.85%. I’m twice as bearish as I should be.
If MOI doesn’t increase markedly this month (i.e get over 20K) then look forward to roughly the same benchmark decline for july. Toss in inflation, and we’re looking about a 1.20% real decline in prices MOM. Over a year…substantial reductions. However, persisitence probably isnt a good forecast method for RE.
“Anonymous { 07.04.08 at 4:06 pm } I am scared. A Real Estate Agent has told us that we will likely not be able to sell our place for what we’ve paid for. Does anyone think the market will recover in the next few year?”
That is pathetic. Which of you bears does not have an imagination?
I can understand Rob touting silly forecasts of 20% to 40% price drops, and placate potential customers-to be, from the bear clan, but a bear pretending to be a “scared home owner” is just over the top.
Get real bears, and start connecting the dots, a market which can withstand sizeable volume drops such as what we are witnessing in Vancouver, cannot crash.
Realtors would like to see price drops so that sales pick up, as a commission on a lower price is better than no commission on high priced listings which is not selling.
But the reality is there are just too many realtors to support the new market reality for years to come, which are lower volumes of sales at higher prices.
When are you expecting prices to drop? When volumes drop by 50%,75%,100%?
Further to my post in #101 above…
What about the realtor who has a new downtown listing and can’t advertise it?
Why is there a cut-off point at 500 listings?
What’s the point of paying monthly dues to the Board when they can’t assist you in marketing your listing?
Good Morning Friends,
Check it out,
A citadel parade unit under 300K. V709676
These have steadily been marked down in price since april… finally broke the 300K mark to 299K yesterday. This should signal larger and faster mark downs.
Bull:
You should get real. What possible good economic news is coming? In the US a recession is already here and now pundits predict a…..depression. Ont already in a recession….China a fragile economy and our economy is as stable as ….well froth on a Starbucks capacino! (oops aren’t they closing over 6000 stores) . Let’s see what our economy is being propelled by: construction, (real estate), renos (real estate), & commodaties. So where’s the stable economy?
Finally it takes 75% of income to buy a shit box house in Vancouver….Just look to Edmonton & Calgary to see what’s coming. Oh I know Vancouver is the most beautiful place on earth (yawn) like London (was) Sydney (was) etc. Wake up and smell the bull shit!
Wetcoaster: It’s not about economics. If it were, economists would be able to predict price moves almost with pin point accuracy.
Economics egg heads clearly pointed out mispricing in 2004, but the prices escalated to new high heights.
Consider, if you will, VHB, Langley Financial etc line of reasoning, good solid reasoning right?
But consistently wrong.
What motivates people to buy? Who has more influence, Freako or Rennie, regardless of the merit of the argument and facts?
Get real bears, and start connecting the dots, a market which can withstand sizeable volume drops such as what we are witnessing in Vancouver, cannot crash.
cannot crash?!
never say never!
hey Rob. Just added your blog to my Facebook with this new blog application for it. I have a lot of friends who may click on it to check it out. You should fire up a page…good way to generate some more hits…then you can fill this puppy with ads and pop-ups and collect, collect, collect….
“Consider, if you will, VHB, Langley Financial etc line of reasoning, good solid reasoning right?
But consistently wrong.”
No, they were consistently right. They said housing was overvalued and price declines were inevitable. Well guess what, now we have price declines. They did not say price declines would start at date X.
“What motivates people to buy?”
When ownership costs greatly exceed rent, the only motivation to buy is continuing price increases. Now those increases have ended. Now why should anyone buy until price decreases end, or ownership costs are close to rent again? Particularly when people can no longer be convinced that our market is “different” from the US.
Ya gotta feel at least a little embarassed for the naivete of “Real Estate Bull” for obliviously charging ahead while yesterday’s bulls are only prolonging the game with a nudge and a wink until they have safely unloaded their remaining investments.
Anyone who fails to understand that the higher a something goes, the harder it will fall, is in dire need to study the laws of gravity before attempting to grasp the only slightly less obvious law of supply and demand.
As for Freako versus Rennie, I’d put my chips on Freako any day, and so would Rennie himself….but anyone with a lick of common sense should realize that such a confession would defy all laws of marketing.
Patriotz and Sympathy:
Wrong assumptions lead to wrong analysis and wrong conclusions.
You assume most purchasers use a calculator and make rational decisions; such is not the case, when it comes to Real Estate.
Homeownership, within some cultures especially among Anglo Saxon cultures, is viewed as a necessary requisite to deserving dignity.
Marketers know this, developers know this, and flippers know this. Why have some of you not learned this yet?
“Homeownership is viewed as a necessary requisite to deserving dignity”
WOW!
Tell that to the poor schmucks who bought in the US 2 or 3 years ago.
Who in their right mind would pass up the opportunity to buy at a 40% discount in a couple of years for the appearance of dignity???
Bull – isn’t England anglo-saxon? Why is it CRASHING there? You dummy.
Who in their right mind would pass up the opportunity to buy at a 40% discount in a couple of years for the appearance of dignity??
Crasher: Looks like you bought some Kool-Aid from Rob and drank the whole glass, if you believe you can buy at 40% discount in a couple of years.
Wow: How much have prices dropped in the UK? , and the poor schmucks who bought in the US 2 or 3 years ago, were poor schmucks who would have not bought if they actually used a calculator, which proves my point, which is they weren’t rational.
Calm down Popeye… The old MLS search only let you see the first 200 results, so 500 is actually better with this new update. If you want to see all the listings just adjust your price range search parameters. MLS isn’t trying to screw you or the Realtors… they simply put a limit on return results to guarantee smooth running of the site and reduce server load.
Bull, I do see your point, thanks for clarifying…but the result is the same, same for tulip bulbs, for tech stocks, for railroad stocks in the early 1910s, etc, etc, etc…this is no different. US is down 15.3% just in the past 12 months, and Bill Gross is calling for another 10% in the next 6 months….I agree, the bubble was formed by mass irrationality, but the result is always a return to fundamentals, which I peg at about 35-45% below current prices.
I guess I’ll wait, and according to you I will be wrong. We’ll see. June 08 was a good month for waiting.
Yes exactly it always has had a cutoff, just run from 0 to 500K and that keeps you under 500. Then run 500 to unlimited to see the rest….
WOW. Don’t pay attention to fundamentals, or nonsense forecasts, from guys like Rob, who have vested interest.
If you want to make big bucks you still can in Vancouver RE.
Here is what you do:
Buy a POS . hire some cheap labour to build as many cubicles as possible and call them bedrooms, wire the bedrooms so that each can have a hot plate and several small appliances.
Sell by owner; talk up the rental revenue potential, mortgage helper, in law suite etc.
Guarantee, big money maker, you won’t have to lift a finger, pay the labour under the table, and get some good deals on everything-keep costs down.
Thanks Rob – the 6% was just the mortgage rate I used for my math. Guess my rent is a good deal for a while longer.
Buy a POS . hire some cheap labour to build as many cubicles as possible and call them bedrooms, wire the bedrooms so that each can have a hot plate and several small appliances.
Sell by owner; talk up the rental revenue potential, mortgage helper, in law suite etc.
et voila instant slumlord… great business plan!
smacks of desperation….
Real Estate Bull
I still can’t figure out whether you’re having all of us on or that you’re the poster boy for denial.
As to what is and what is not possible or plausible for Vancouver RE prices one only needs to refer to history. It is a well documented fact that there have been four corrections in RE prices here since the mid-seventies at an average of rate of roughly 28%. It is also a fact that the run-up in prices in Vancouver has been one of the most significant and protracted in our history. Only someone blind to historical fact, unschooled in economics and unmindful of the fact that market psychology cuts both ways, would characterize the potential for a 20-40% correction as “silly”.
As to economic predictions of pin-point accuracy, there is no such thing; there are too many variables involved not the least of which is market sentiment. That is why a whole legion of economists in the US failed to predict the severity of their downturn. It would also account for the blinding speed with which some of our local economists have gone from characterizing our market from sellers’ to balanced to buyers’. That said, to surmise that any market is not influenced by economics is just plain idiocy.
If you’re attempting to be an agent provocateur, you might try to inject a bit more subtlety in your posts and rely less on the outrageous. If you are sincere then I don’t know what drummer it is you’re marching to but he’s skipping a lot of beats.
If you are sincere then I don’t know what drummer it is you’re marching to but he’s skipping a lot of beats.
REB reminds me of dosh but with more knuckle dragging…
….. from the “satv” end of the gene pool….
Good post Jonnyrent….probably wasted on trolls like REB, but hopefully appreciated by some deeper thinkers.
If you ask me, the gene pool needs more chlorine!
Question.
Remember the mass hysteria regarding the leaky condo crisis? When the median prices slide 10% do you think the fear will infect joe pipelayer is the same fashion?
*in the same fashion
do you think the fear will infect joe pipelayer is the same fashion?
if jp loses his job and his basement tenant checks out in the middle of the night the word fear would be inadequate….
So my partner and I have been looking at rentals. We’re looking for a quality 2Br + say East Van, Burnaby. Perhaps a new condo. Here are some observations:
i) Prices range from $1.5-$2/sqf per month. $1.5 is a good price for anything new-ish, 2$ is too much.
ii) Strangely, prices seems only weakly dependent on geographic location. This units
http://vancouver.en.craigslist.ca/apa/743688763.html
http://vancouver.en.craigslist.ca/apa/743688058.html
are both brand new, the same size and the same price. The former in King Edward Village and the latter in Highgate Village of New West. But one location is a far from Vancouver and the other is not. It seems as though for new condo’s people ask $1800/month irrespective of location.
iii) Many investor’s don’t price their rentals that well. When they err, they ask to much. For example, this unit
http://vancouver.en.craigslist.ca/apa/743898080.html
also in King Edward Village is only 875sqf (I saw it). It’s second floor faces right onto Knight and the noise is unbearable. The “den” is the storage room by the entrance.
Sapphire Pender and Bute
http://tinyurl.com/6eclb2
600+ sq. ft. $1600 and up
brand new
Dmelo, in 116 you responded to me…..
“Calm down Popeye… The old MLS search only let you see the first 200 results,”
I am not aware of any “old” MLS search except for the one they had running 25 years ago. You are probably confusing the Board’s site with Prompton RE Services which only preferred to show 200 listings.
“so 500 is actually better with this new update.”
It is not an update at all. It is a deliberate attempt on the part of the Board to conceal the huge number of listings and avoid embarrassment. They do not want the public to know there is a huge stampede to the exits.
“If you want to see all the listings just adjust your price range search parameters.”
That is exactly what I did. Originally, the price range is set by default from 200.000 to a max of 900,000.
I then entered a range of 200,000 all the way up to 2,900,000 to capture every possible listing. The result was the same with the message:
“More than 500 Properties were found that match the search criteria. Only first 500 shown.”
In fact, nothing priced over $598.000 can be found. Check it for yourself.
“MLS isn’t trying to screw you or the Realtors… they simply put a limit on return results to guarantee smooth running of the site and reduce server load.”
This statement leaves me breathless. Firstly, I would suggest you talk to realtors for an opinion on whether they are being “screwed” or not. Then check with a prospective vendor of his condo who wishes to sell his unit with no exposure. Secondly, it indicates you know little or nothing of Information technology (IT). Posting listings has nothing to do with ’servers’ at all.
Good night, Dmelo. Sweet dreams of the coming crash.
Johnnyrent:
Your argument is sound, and it makes a lot of sense, but like the other bears, you miss the premise of my argument.
Human beings are neither logical nor rational. Why would they smoke, or gamble.
History may be a reference point only if the present has not changed so much as to make all previous knowledge redundant.
The market players have changed so much since the last corrections; this is why theory models that don’t account for the drastic changes cannot explain the extended boom.
As an example as stated earlier, Anglo-Saxon culture stigmatizes renters, and the need to own is so deeply rooted in native Vancouverites, it is imprinted in the limbic system.
Further, the influx, over the many years, of people from second and third world countries, which are so used to getting by with so little, they can actually save money on minimum wage jobs, and don’t mind living with large extended families, have made basic metrics of income to price irrelevant.
Popeye. Remove the tinfoil hat and take a closer look. If you can’t figure out how to properly work a basic MLS search engine, then I’m afraid I can’t help you. Maybe ask Jeff to walk you through the searching process… I hear he has a lot of time on his hands lately.
vali gsxq apzkdnq sxrpjy eoflpatq slbf lxhtj
popeye:
run a search with the parameters of $597K to $1.5 million
if nothing shows up i’d be surprised
vali gsxq apzkdnq sxrpjy eoflpatq slbf lxhtj
valium? xanax? paxil?
in this RE market you really do need to self medicate
Lots and lots and lots of empty apartments at Sakura. Lots of agents at the door saying “let’s make a deal”. Lots of nervous specuvestors. And to top it all off there are two more towers just like it about to complete in a 4 block radius. Long live greed.
here’s a hottie:
http://tinyurl.com/mustsell
Must sell in 1 week. Highly motivated seller.
This is a stat I haven’t come across until now. Taken from The Vancouver Real Estate Barometer.
“The “new construction” sector of the real estate market is over-supplied with available inventory. In fact, with only 222 sales reported last month and 3,125 current listings for a 7.1% sales to active listings ratio, or 14 months of supply, this sector of the market is seriously under performing. “
Re Estate Bull.
My wife and I are both professionals making a decent living. We rent. We have a healthy down payment saved. However, we will not buy into this ridiculously over priced market at it’s current state. Ps. I’m Anglo-Saxon and people can stigmatize me all they want for renting and all I have to say to them is “They are sad, little people with little lives and nothing better to do than call others down.” I will not be saddled with an outrageously high mortgage. We are BANKING on a market correction….and if it doesn’t happen, then I guess we don’t own hey? We’ll invest our money elsewhere for retirement. I know other just like me. They are willing to wait it out.
Imperial Villa
6730 Willington Ave, Burnaby
Unit 216, 2 bedroom Apt, facing west
near Central Park, Metrotown, Library
Rent per month: $1,000
Deposit: $500
Lease: 6 months
Available: August 01
Tenant just moved in, but has to move out for personal reason.
Contact Manager: 604-454-1607
2008-07-05 16:28:32
3-bedroom rancher
Marine and Cambie, near Langara
Rent per month: $1,300
Plus half utility bill
Connie: 604-809-7613
2008-07-05 08:58:40
Bachelor Apartment
New Westminster
Rent: $650 (includes utility)
No Pet
Near skytrain & bus
Available: August 1st
Contact: 604-618-7766
7/5/2008
http://www.chinese.myhomevancouver.com/addetails.aspx?postid=30578
8635 Heather St, Vancouver
1 bedroom Apt
Rent: $850 – $900 (includes heat and hot water)
No pet
Contact: 604-657-6129
Very quiet 1bedroom apartment with balcony, hardwood floors,
8635 HEATHER ST VANCOUVER.
$850 – $900 per month, no pets, no smoking, heat / hot water included.
Lease & References required.
View by appintment only.
For the suite availability or further information,
please call 604-657-6129
7/5/2008
http://www.chinese.myhomevancouver.com/addetails.aspx?postid=10233
2 bedroom Apt
Burnaby North, 812 ESMOND AVE.
Bright, spacious 2 bedroom in 4-plex, heat, hot water & parking included
$875 no smoking, no pet, Available August 1st
For rental inquiries please call 604.291.9772
7/5/2008
http://www.chinese.myhomevancouver.com/addetails.aspx?postid=33007
3720 Main Street, Vancouver East.
1bedroom suite, close to bus stops and stores.
Starting at $725,
no smoking, no pets,
lease & references required.
Open house on Sunday 10:00 – 10:30 am
For inquiries call 604-267-0602 or 604-671-8507
7/5/2008
http://www.chinese.myhomevancouver.com/addetails.aspx?postid=24240
near West 11th and Oak and Vancouver General Hospital.
Vancouver West Bachelor apartment suite, clean, quiet,
5 appliances, large deck, laundry, parking,
Available August 1st.
no smoking, cat okay!
$1000 + utility.
References required.
For more info or viewing please call 604-738-4449
7/5/2008
http://www.chinese.myhomevancouver.com/addetails.aspx?postid=32782
Vancouver West 10th Avenue.
NEAR UBC 1bedroom Apartment.
$760 & up. Included parking,
no pet, no smoking,
lease & references required.
Call 604.512.3600 for more info/checking the vacancy.
7/5/2008
http://www.chinese.myhomevancouver.com/addetails.aspx?postid=18416
Vancouver 1 bedroom apartment,
near East 44th Ave & Fraser.
no smoking no pet
Starting from $750 included hot water.
Available Aug. 1st.
For checking the vacancy or more info
please call 604-437-4135 or 604.437.4194
7/5/2008
http://www.chinese.myhomevancouver.com/addetails.aspx?postid=31840
New Westminster Large two-bedroom apartment suite.
Near Royal City Centre.
From $880/month. Included heat and hot water, parking, storage.
Sorry no pet.
Avail August 1st.
For viewing or more details, please call 604-524-4775
7/5/2008
http://www.chinese.myhomevancouver.com/addetails.aspx?postid=19437
Popeye, you need to choose a location like Dunbar to get it right, not just Vancouver west for example.
Popeye
Don’t embarrass yourself and just take some time to figure out the MLS search. Don’t jump to erroneous conclusions. Just restrict the criteria of your search because there are thousands and thousands of listings if you parameters are too wide. Too many to show at once. Narrow down the area of your search and the $ ranges. Got it?
RE Bull
In fact, if one of your operative points is that people are not rational, I concur, but this supports my contention about the likely direction of this market, not yours.
Probably one of the best phrases to characterize this market’s precipitous and relentless rise is irrational exuberance, by the book of the same name. We have up until now experienced a flurry of buying and resulting price increases that are well beyond all rhyme and reason. The flip side will now be a divestiture of an equal order of magnitude with predictable results that have considerable historical precedent locally, supported by market evidence on a worldwide scale.
I don’t believe that the need for home ownership is any more ingrained here than in any other part of North America and I cannot think of a single reason why it would be. If you’ve been following market trends you would know that a good deal of buying has been on the part of investors, not homeowners, and that recent and current building activity has as much to do with feeding into the investment psychology as it does serving the intrinsic need for housing, which it long ago eclipsed.
In short, we’ve been building a deck of cards here in Vancouver. Like all structures of this sort, it will fall down under its own weight, as it appears to be starting to do as we speak.
Random Pick:
What’s your point? You can find 1$/sqf per month, but they are ghetto, no?
Blueskies, I stand corrected. Thank you. Yes, you need to narrow the parameters to find additional listings provided your search is narrow enough. But they give you no clue what numbers the system accommodates before they reject your request. This could be a deliberate policy or just carelessness on their part.
Yawn
Pearl,
You should visit a ghetto sometime.
RC: how are the ads working out? Coffee cash or better?
Here are your indicators:
Coffee cash. Beer cash . Gas cash. Nice Cabernet cash. Dinner at Diva cash. Dirty weekend cash. Week in Hawaii cash. Weekend in Vegas cash. Buy a Condo in Stockton CA cash. Early Retirement cash.
“I don’t believe that the need for home ownership is any more ingrained here than in any other part of North America and I cannot think of a single reason why it would be”
Johnnyrent: What’s at play here? Why is Vancouver one of the most expensive places on earth?
“My wife and I are both professionals making a decent living. We rent. We have a healthy down payment saved. However, we will not buy into this ridiculously over priced market at it’s current state”
Pat Bell:
Look around you. Does anyone else in your family, your in laws, your business associates think like you?
No, you are a minority, the glossy lifestyle brochures won’t hook you and the marketing is not directed at you.
And what is ridiculously priced? How much would prices have to come down for you to purchase?
Will the traditional measures of 100 x rent do it for you?
Or 2, 3, 4, 5, 6, x household income?
How much?
I think home prices will come more inline when the average Vancouverite doesn’t have to rely on a 40 year mortgage to purchase an East Van fixer-upper.
And when a downpayment actually means something against the purchase price in a house, not as an immense hurdle that people are only able to pay down 5% of the purchase price rather then the historic norm of 25%.
That’s when things will be more inline…
Johnnyrent: What’s at play here? Why is Vancouver one of the most expensive places on earth?
irrational exuberance!
hot air holds up the market until it doesn’t
i’d buy back in at 100x-170x rent
from The Vancouver Real Estate Barometer.
i notice the link for this from upthread is no longer working…
REIC conspiracy?
VD
In addition to the units coming on from the Sakura, I believe there are some units available at the Avedon which was completed last year. The building is about 4 blocks away.
Real Estate Bull wrote:
“Wow: How much have prices dropped in the UK? , and the poor schmucks who bought in the US 2 or 3 years ago, were poor schmucks who would have not bought if they actually used a calculator, which proves my point, which is they weren’t rational.”
RE Bull–can you clarify? What would they have found with their calculator–if they were “rational beings” instead of “poor schmucks” what numbers would they have entered in, what numbers would have come out, and how would the rb/ps have used it to their advantage?
Thanks in advance,
WBWUCR’t'13?
Whybuywhenucanrent:
What I said was:
“Human beings are neither logical nor rational. Why would they smoke, or gamble.”
My argument in a nutshell is that as long as we have “howmuchamonth” buyers,and lenders who will accomodate them, as irrational as they are, the market won’t collapes.
I know one couple who bought a condo on 3rd and Woodland in east van, to make ends meet, they are renting out the second bedroom to 3 girls who attend a school on Terminal Ave which is within walking distance.
When you need to rent the other bd in a 2bd condo…to THREE other people…just to make ends meet…prices are seriously stupid. I don’t belive many would go to the same length to buy what they clearly can’t afford.
ceejay, what’s your theory of what is supporting the current prices? income/ pop-growth? international investors? take it away….
Simple minded bulls like you that are putting fear in FTB that they may never reach the dream of homeownership… It’s clearly not income… int’l investors(speculators) they definately play a role. I say the rule of 200x rent is a good indicator that the market is overpriced. no one should buy until that comes back in to play… problem solved.
The CMHC and the interest rates(40 yr amo’s and 0% down) Creative financing and false documentation. It all plays a role. But never forget that cash is King and the one who has it controls the market…. 200x rent nothing more
A major support beam for this market is the 40 year mortgage. But that’s nothing much more than a long term forward contract on real estate prices.
What supports rising prices is buyers. Prices decline when buyers withdraw. Sales are lower thay they have been in at least 4 years. So buyers have withdrawn.
Why? In heavily speculative markets like the GVRD, its a loss of confidence (I won’t make any $$ if I buy now, or i’ll lose what i’ve gained if I don’t sell) In less speculative markets, its recession. Here, we’re looking at both.
Re Bull.
I will agree with you that there are always buyers in every market (So does Garth Turner). But, given the list/sell ratio we now have, it is clear there are a lot more that aren’t willing to take the chance that the market won’t correct. That obviously means that there are MORE thinkers like me hey? That will only increase when interest rates rise.
What would my entry point be? Well, a point where I don’t feel like the majority of my net income is eaten up by a mortgage….also, that means “just my family and me”, not 3 girls living in my other rooms so I can supplement my mortgage payments. I don’t need to own that bad. I tend to follow history as history shows time and time again that when something goes up fast it also comes down hard.
Just came back from downtown. Too many condos to visit so I picked only one near the beach. Itchy realtors just staring at me and the spouse in the elevator waiting to “explain” how the market is still set to rise modestly this year and next. Then, when we’re all inside and I can barely look around the place because it would be impolite to walk away while they’re pitching me and explaining to me the fundamentals of a constant rising Vancouver market they say that the owner has had this place on the market for over 100 days and he’s really feeling the carrying costs (yeah, right!) so couldn’t I just imagine the opportunities in making an offer right now as the price has just recently dropped.
The condo market downtown is so different than it was last year you can’t help but smell and taste it the panic coming off the realtors. I don’t know what RE Bull is on but he should try Claritin to unblock his olfactory senses.
Real Estate Bull,
Your thinking stinks worse than the kinda little brown stain I’d like to leave in the corner of your DTFCN bedroom.
“Itchy realtors…” lol. Nice visual.
Re Estate Bull
Please don’t leave this board. You are in “bear country” big time and give us all a reason to keep posting.
When I started reading this blog a few months ago there were probably 50/50 bears to bulls. Not anymore. Now one Bull (you) posing as a few people perhaps. I am sure a two years ago Bears were hard to find.
Sign of the times
what’s your theory of what is supporting the current prices? income/ pop-growth? international investors?
based on long term economic history asset bubbles always collapse….. with no exceptions
we are next….
Sorry for my ignorance but could some please explain what “200x rent” means?
Thanks
“to make ends meet, they are renting out the second bedroom to 3 girls ”
All bull/bear BS aside, THAT** might just be the best deal in town!
**assumption that girls >=18 . . .
in a normal market a house is valued by what it can earn in rent. the standard metric is usually 100x monthly rent…
$1200 monthly rent would imply the house is valued at $120K
vancouver has a premium ’cause everybody wants to live here therefore this same house is valued at $240K (200x)
“When I started reading this blog a few months ago there were probably 50/50 bears to bulls. Not anymore. Now one Bull (you) posing as a few people perhaps. I am sure a two years ago Bears were hard to find. ”
Pat, point well taken, in fact even the host blogger, Rob, is now predicting a 20% to 40% price drop.
blueskies:
where…. I’d love to rent for 200x??????????
I pay 312x
VHB: 18+ very pleasant, petite, and “very appreciative “of me showing them around.
VHB: oops! did I just give myself away with a remark like that?
If you’re renting to 3 lovely women and you’re in an “open” arrangement, normal RE metrics no longer apply
you guys are hilarious
Once the “renting the rooms to 3 girls ” entered the equation all the guys …turned GUY ha ha
Some things are more important than capital gains. Unless Mr. Roper keeps sneaking around the place. That would be a true turn off
VHB
**assumption that girls >=18 . . .,/i>
this particular business model was tried at Spectrum.
an 8 bed massage “rub ‘n tug” parlor…..
i’m sure this was a cash flow positive operation
but higher authorities apparently disagreed….
“Unless Mr. Roper keeps sneaking around the place. ” Hey, there’s always room for one more. However, it’s not clear that Roper liked the girls . . .
You are truly decadent, Mr.VHB.
Not that there’s anything wrong with that…
(credit to Seinfeld)
Hey Ceej, the bear cave can get lonely at times. All that hibernating . . .
Holy smokes, Vancouver prices are down 3 or 4% from last year, according to this site http://agentwill.com/weekly-stats/
That was fast!!!
Right on Garth, you rock buddy, you just rock. Hope tnq’s screams are not keeping you guys out east up at night, he really is creating quite the racket out here. At least Rob’s hawklike watchers just watch quitely, and pass the time in seclusion. Come on tnq, screaming and wailing will not help ease the pain. You were warned.
http://www.greaterfool.ca
“Holy smokes, Vancouver prices are down 3 or 4% from last year, according to this site http://agentwill.com/weekly-stats”
I am a bit confused about this statistic. I thought we had just managed to see MOM drops, but as far as YOY I thought we were still far from (in the neighborhood of 7%) any drops whether in terms of average/median/benchmark…
homelessness story
http://tinyurl.com/5woe5z
Both my wife and I are unemployed professionals…
interesting read
where…. I’d love to rent for 200x??????????
I pay 312x<<
Wouldn’t that be the other way around? I rent a 437 rent multiplier, last time I checked, but I would love to rent a 1000 rent multiplier. If I was renting a 200 rent multiplier, I’d buy it.
If I was renting a 200 rent multiplier, I’d buy it.
as would a lot of others
it would be a “screaming buy”
i be a bull!
Hey Boyz. I think Mr. Roper may have been battin’ for the other team. Although, if I was living with Mrs. Roper…hmmm
N2V, those stats are for last week, not for last month. This shows how quickly things are going downhill as we speak.
From that site, I also calculated 8 months of inventory for last week.
I went to 6 open houses in Port Moody & Coquitlam today, some in the same buildings that I looked at last month. The prices just keep tumbling down. The best one being a unit we looked at last month going for $379,800. Today? $345,900 (10% haircut). The realtor’s reason for the big drop? The ‘local’ investor is nervous about the market. I asked her if she thought he’d consider an offer 10% below the asking price (~$310,000) and her response, as expected, was “Yes, make an offer, he’s VERY motivated.” I don’t blame him, nearly 20% of the units are for sale.
RE BULL,
if they are brazillian i know who you are.
“N2V, those stats are for last week, not for last month. This shows how quickly things are going downhill as we speak.
From that site, I also calculated 8 months of inventory for last week.”
I see. In that case though, a 3-4% YOY drop based only on last week’s figures may have to be taken with a grain of salt. Nevertheless, lets hope the trend continues!
Suddenly people who need to sell are asking me how cheap they have to go, and people who wanted to buy two months ago are too afraid to make an offer.There is no market.”
excerpt from Garth’s website…… WE AREN’T HERE YET. IMHO
exx,
can we get a mls number on the unit u mention in #196
Regarding Agent Will’s blog, he says this about his weekly stats:
Areas included for the count are: Vancouver West, Vancouver East, Burnaby, Coquitlam, Port Moody, Port Coquitlam, New Westminster, Richmond, North Vancouver, and West Vancouver. South of Richmond, East of Port Coquitlam (Maple Ridge/Pitt Meadows), and North West of West Vancouver (Islands, Squamish, and Whistler) are not included.
This probably differs from GVREB and Paul’s areas. He also only splits into “Attached” and “Detached” so it’s not clear exactly how the price drops are calculated or broken down. Still…. seems reasonable to me. I wish someone was posting this kind of thing for Victoria.
Newcomer:
200 rent multiplier is too high unless interet rates go quite a bit lower. 150 to 175 is worth looking at. I haven’t seen 100s on good proeprties since the late 80s.
REB:
“in fact even the host blogger, Rob, is now predicting a 20% to 40% price drop.”
The call for a correction (defined as 20% -40%) has been around a long, long time. It pre-dates this version of the blog. There’s nonthing “now” about it. It was always a question of when, and I always admitted I didn’t know when it would happen. I’m not even 100% sure we’re going to see it right now, or even within a year.
ceejay:
I’m still waiting for the cheque. Maybe they got my addresss wrong
Popeye:
I think you’re confused about the MLS system. Realty link online and MLS.ca aren’t the same system that Realtors use. There’s no restriction on the MLS system. List it and it will appear.
I see the sillyness in my comment about the rent multiplier…. guess I think from an owners perspective… deep down underneath I am an owner type… currently rent because prices are nuts.
What I guess I meant is that there is no way people are paying rents on average that are only 200x and I would like us to get OWNING PRICES back to that so that I become an owner again.
When I sold my place in Toronto 2.5 years ago it sold for $355,000 and would have rented then for $2,000 = 177.5 times. Now it would sell for $400k and rent for $2,300 = 174 times. 900 sqft, 40th floor, 2 beds, 2 baths, parking, locker.
[...] July 2008 · No Comments This update from the frontlines from exx at Rob Chipman’s Blog July 6 2008 at 9:44 pm [...]
Rob,
I pay 1600 for a four bedroom house near the drive that was built in 1928 and renovated in the 80s. At a 150 rent multiplier it would sell for 240K. I have a hard time believing that is ever going to happen. Admittedly, my place is nothing special, but rentwise, you can get a decent enough house for 2500. At a 150 multiplier, you are looking at 375. Do you think that things are going to be selling at those sorts of prices in the future?
Newcomer:
The metrics that I use say 150-175 requires a closer look. 200 generally results in numbers that don’t make the investment attractive. If I say we won’t get back to those ranges again, I’m saying, in effect, that the rules have changed. That verges on silly. Remember the tech boom, when people said “fear and greed don’t matter anymore. Its a new economy”. Same guys who said Y2K would result in starvation because grocery stores wouldn’t be able to sell food without computers.
And yet, I remember finding places with rent multipliers of 100 around here, as well as agreements for sale and what not. All gone now. What happened? Interest rates fell, to begin with, meaning multipliers could be higher. Mortgage funding became more widely available, as well. So, thing can change, including fundamental metrics. Still, I can’t see what would drive rent multipliers higher while keeping them acceptable. I won’t rule it out, but I don’t anticipate it. That’s the long version of “Yes, I think we’ll see rent multipliers of 150-175 again”. The only reason we won’t is if inflation becomes a long term fixture, and annual gains are dependably higher than 5% (net effect is that todays 200 rent multiplier will be tomorrows 95 rent multiplier) although that would imply higher interest rates, which means lower rent mulipliers. Go figure.
I’m having trouble posting again (at least new psots) so here’s a preview of tomorrow mornings post (I think its got something to do with my home CPU)
Weekly Stats
There were 1150 new listings this week and 479 sales in my target area this week, for a sell/list of 41.65%. Of the sales 22, or 4.59%, went over list.
Average list price of sales was $540,912 while average sales price was $15,707, or 2.9% lower, at $525,205.
Average DOM was 37.
The average list price of over-lists was $710,168, while the average sale price of over-lists was $722,927, or +12,759, or +1.8%. Average DOMs for over-lists was 23.
Inventory reached 18,205, of which 3,471, or 19.07% were over 90s.
There were 827 price changes (what’s the sell/pc ratio? 57.92%!) Average original price was 642,635, while the
average new price is $25,580 lower, at $617,055. Average DOMs to price change was 56.
The average sale price this week was only 85.11% of the average new price for price changes.
In other words, the average sales price was 2.9% off average list price of sales, but the average new price of price changes is 16.98% higher than the average list price of sales.
The difference in opinion in the market is widening.
4.48% of all active listings in my are had their prices reduced last week.
Real Estate Bull–
In coment # 115, you wrote:
Wow: How much have prices dropped in the UK? , and the poor schmucks who bought in the US 2 or 3 years ago, were poor schmucks who would have not bought if they actually used a calculator, which proves my point, which is they weren’t rational.
Could you elaborate? What numbers would they have put into their calculators, what #s would have come out, and how would it have informed their decision?
Thanks in advance,
WBWUCR’t'13?
Found this over at Fish:
http://www.youtube.com/watch?v=7_yjdXoFaic
Garth’s latest… “There is no market”
http://www.greaterfool.ca
My argument in a nutshell is that as long as we have “howmuchamonth” buyers,and lenders who will accomodate them, as irrational as they are, the market won’t collapes.
My response in a nutshell is that with lenders handing out money to anyone who could breathe, the US still collapsed.
And if you want to say “Canada is different” how come Edmonton (you know, the capital of that province with all the oil), is now down over 10% from peak?
Patriotz: Doesn’t my remark about the “howmuchamonth” buyer and lenders who are willing to accommodate the risky loans imply that I believe we have easy credit just as the USA?
I believe credit in the Lower Mainland is easier than it is in the US; it’s just that the bears have been conservative not to take advantage.
As for Edmonton, I did not say Canada is different; in fact Edmonton is no different than any place in Nebraska or Texas.
What I did say is that Vancouver is different in cultural make up; to be specific I brought up the Anglo-Saxon culture which values property ownership as sacred.
The market is about to heat up again, you will soon see Rob back out of his 20% to 40% correction prediction.
Anglo-Saxon culture? Aren’t Caucasians now a minority in the GVRD? Edmonton, now that’s a white city, if it’s a factor they won’t crash. Oh wait, they are crashing. Maybe London and the UK? Nope, they’re cooked worse than we will be. Better go back to mountains and the olympics!
Anglo-Saxon culture? Aren’t Caucasians now a minority in the GVRD?
Alexcanuck: One can be Anglo cultured and not be Caucasian. In fact, Europeans from the continent have a much different view of property ownership, and when the other European Cultures were in the Lower Mainland I sufficient numbers they acted as a counter balance to the Anglo’s obsession with property.
But all that has changed, that is why history no longer applies to Vancouver.
RJ, the MLS is V709671 – it hasn’t been updated with the latest price drop yet.
The MOM inventory growth is flat….
The REB must be influencing the market.
Watch the UK banks and real estate over the next 6 months REB if you thought the first half of 2008 was bad for banks.
Rubin, just downgraded the TSX from 15200 year end to 14300, the writing is on the wall.
Listings June 9 2008 Coal , DT, false N, Kits, WE, = 1745
Listings July 7 2008 Coal , DT, false N, Kits, WE, = 1753
0.5% increase in listings MOM
history no longer applies!!!!!!
This has got to be the dumbest statement I’ve seen in a long time!
history no longer applies!!!!
You MUST be trolling, I’m no longer interested in you. Thank goodness for scroll wheels.
Alexcanuck, that is not a fair comment, you know I was referring to the historical boom bust aspect of Vancouver RE.
exx,
thanks.
do you know what the original purchase price was? are they under water?
Rob;
You’re both right. Its completely luck.
I meant it takes real luck to predict the future, which is what I read your comment to be (taken from you talking about slanty making a ‘correct’ decision and still not being an idiot.)
Hard to maintain that its irrelevant if you’re going to factor it in when it comes to returns (and you have to do that).
I would maintain that it is irrelevant. You are either borrowing money and paying interest or forfeiting the opportunity to use your cash otherwise.
Either way, the nature of the investment is exactly the same. The metrics of DP/Cash flow and so forth are just metrics – either way, the same return will be there. Granted, those involve interest calculations which is important when you plan on financing… but the method of financing doesn’t affect the investment itself.
Still, I need to factor in the return on DP (and other things) if I’m ever going to make a case to someone like you that RE is a good investment.
That may be (although I want to know the return, not the return on DP), but you would have to show me is that the return on real estate has a better risk-reward than the other alternatives. Return on DP (ie: leveraged amount) is a metric and like all others, needs to be compared to alternatives (inside and outside that class of assets). I’ve used bank stocks as an example of an equally leveraged investment that is “cash flow neutral”, but regardless of what it is, borrowing or not borrowing is generally a financial (personal risk, risk of ruin and so forth) decision, not an investment one.
That doesn’t make it good or bad. I’ve long since believed real estate is a good investment, at the right numbers.
You may not have heard me say this, but I really don’t like to consider the principal residence as an investment. The gains are seldom real unless you’re leaving the market. I could rent where I live for way less than it costs. I pay a premium to own. It isn’t often in Vancouver that owning quality property is cheaper than renting.
Metrics don’t need to be used just for investment decisions. For example, I still use cost/use or cost/hour for entertainment purchases. The reality is that our instincts are to make impulse buys when it comes to entertainment (DVDs are a good example… were a good example, perhaps) and I’d rather get the most long term value possible.
In a similar way, the reason I say 5% (ish) is because it is very easy to pay too high a premium based on emotion. By deferring the purchase, it is likely you will gain more utility in the future that you would by buying at that price. Keep in mind that every 100,000 or so you save when buying ends up giving you something like a $4000 vacation in perpetuity. Opportunity costs, right?
They may not have confidence, but they’ll keep multi-bidding on RE, right tnq?
Oh, stop your screaming already.
Consumer confidence hits 12-year low
Canwest News Service
Published: Monday, July 07, 2008
OTTAWA – Consumer confidence continued to decline in June, falling to a 12-year low, the Conference Board of Canada reported Monday.
The index, with the level of confidence being equal to 100 in 2002, fell 6.2 points to 79.6, following a seven-point drop in May, leaving the second quarter reading at its lowest level since the fourth quarter of 1995 when it was 68.8.
“The continued rise in gasoline prices and concern about future economic conditions are the likely culprits behind declining levels of consumer confidence,” the think-tank said.
Gas prices and concern about economic conditions ‘are the likely culprits behind declining levels of consumer confidence,’ the Conference Board of Canada said Monday.
The erosion of confidence was widespread, hitting all regions of the country, it said.
The steepest decline occurred in British Columbia where the index fell 9.3 points, dropping below 100 for the first time since mid-2003, it said.
Speaking on Can West Global… check out the inside buying….
CanWest Global Communications Corp. (CGS) As of July 6th, 2008
Filing Date Transaction Date Insider Name Ownership Type Securities Nature of transaction # or value acquired or disposed of Unit Price
May 09/08 Apr 29/08 Fairfax Financial Holdings Limited Indirect Ownership Subordinate Voting Shares 10 – Acquisition in the public market 375,000 $4.130
May 09/08 Apr 29/08 Fairfax Financial Holdings Limited Indirect Ownership Subordinate Voting Shares 10 – Acquisition in the public market 375,000 $4.130
May 05/08 May 02/08 Asper, Leonard Indirect Ownership Subordinate Voting Shares 10 – Acquisition in the public market 250,000 $4.200
Apr 29/08 Apr 29/08 Asper, David Indirect Ownership Subordinate Voting Shares 10 – Acquisition in the public market 250,000 $4.130
Apr 18/08 Apr 10/08 Fairfax Financial Holdings Limited Indirect Ownership Subordinate Voting Shares 10 – Acquisition in the public market 481,600 $4.550
Apr 18/08 Apr 09/08 Fairfax Financial Holdings Limited Indirect Ownership Subordinate Voting Shares 10 – Acquisition in the public market 406,500 $4.550
Apr 18/08 Apr 10/08 Fairfax Financial Holdings Limited Indirect Ownership Subordinate Voting Shares 10 – Acquisition in the public market 481,600 $4.550
Apr 18/08 Apr 09/08 Fairfax Financial Holdings Limited Indirect Ownership Subordinate Voting Shares 10 – Acquisition in the public market 406,500 $4.550
Apr 11/08 Apr 01/08 Fairfax Financial Holdings Limited Indirect Ownership Subordinate Voting Shares 10 – Acquisition in the public market 82,500 $4.800
Apr 11/08 Apr 01/08 Fairfax Financial Holdings Limited Indirect Ownership Subordinate Voting Shares 10 – Acquisition in the public market 26,200 $4.800
– Amended Filing
Quadruple – is that a lot?
Local rental market opens up
Number of vacant units quadruples from last year
Marty Hope, Calgary Herald
Published: Saturday, July 05, 2008
For those looking for rental digs in Calgary, it’s not going to wear out as much shoe leather this year as it did last, says the federal housing agency.
In its semi-annual rental market survey taken in April but just recently released, Canada Mortgage and Housing Corp. has reported a quadrupling in the number vacant apartments in the city compared to a year ago — to two per cent from 0.5 per cent.
But all that has changed, that is why history no longer applies to Vancouver.
Oh fer crissakes. I’ll bet even the most ardent bulls are blushing in embarassment at that statement.
RJ, no… actually I’ve never considered asking that. Is the original purchase price information that realtors have and will typically give out?
Also heard this on News1130 this morning
Between 40-year mortgages and a softer real estate market, some recent homeowners now hold mortgages greater than the value of their homes.
Household debt has been rising steadily in Canada
Recent homeowners in Vancouver with negative equity? I suppose I would be one of them if I had bought that condo last month which is now $30K less
Rob, Jeff – do you expect:
Prices to fall this month?
Sales to decline, vs. same month last year, by over 50%?
thank you.
Jeff – why is tnq screaming so loudly – are things really that ugly out there?
OWW,
tnq screaming yes yes yes!!!
Spectralshift:
I don’t think you’re going to convince me. I agree with your theory, but my challenge comes in application. Its pretty easy for me to borrow money top buy real estate and thereby enjoy the power of leverage. I’m told that its just as easy to do the same thing with all sorts of investments, and that may be true, but I’m not familiar with how to do it.
I’ll use a real property as an example – the buyer put $18,000 down and mortgaged the rest. It cost $64,000 and cash flowed. 4 years later the place is worth somewhere north of $150,000. If you had paid $64,000 cash for it, no mortgage, would you consider the return the same as if you had paid $18,000 down and mortgaged the rest? The old story about the two buyers applies. Both had $64,000. One guy bought one unit cash, no mortgage. The other guy used his $64,000 to buy three units.
That approach is common in real estate, and pretty safe (you don’t need double digit annual appreciation to make it attractive); I don’t know how easy or common it is in other investment fields. It makes it hard for me to disregard the DP or say that the return doesn’t change based on how the purchase is financed (and we haven’t even touched on tax implications).
At the same time I don’t want this to be construed as a recommendation that an investor ignore opportunity cost – there are other options aside from real estate, after all.
B.C. records biggest drop in consumer confidence
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