Your outlook on current Vancouver Real Estate Prices?

[rawb]

you're 100% right, i wasn't cluing in.

if you're a house flipper you're fucked.

fucking flippers anyways.

[Grapes]

^ Absolutely. In the end it's their money and they can do what they like with it, but I've always found something a bit "off" about treating homes like they're poker chips. It's probably a morally neutral act overall, but I'm not going to lose a lot of sleep about the whole gambit blowing up in their faces, because that's just what it was: a gambit.

Someone wrote a great editorial (that I wish I'd kept a copy of) in either the Sun or the Globe and Mail about the myths of the housing market, and one of the ones that jumped out at me was "Myth #.. "Houses aren't like stocks because they never lose value, they only go up""

Lol.

[ebbomega]

Doesn't the stock market generally trend upwards as well? That's the whole idea behind mutual funds...

[diva]

I went to a few open houses in Yaletown over the weekend. I noticed that real estate agents got super nervous whenever I asked a question they didn't want to give me that answer to. Simple stuff like "why are your clients selling?"
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Update on the Infinity Project in Surrey.
Real Estate Talks • View topic - Infinity project in Surrey under bankruptcy protection

[Sykonee]

Originally Posted by Grapes

Someone wrote a great editorial (that I wish I'd kept a copy of) in either the Sun or the Globe and Mail about the myths of the housing market, and one of the ones that jumped out at me was "Myth #.. "Houses aren't like stocks because they never lose value, they only go up""

Lol.

True enough. What usually gains in value is the LAND the house is on.

Edit: To clarify, a house can add to the total value of the land, but a house's value can decrease as well, reducing the total value of the land. In general, though, land itself doesn't depreciate.

[diva]

Going to go on record with a prediction of a 35-40% drop from Spring 2008's peak by 2011. Inflation adjusted. With the downtown condo market facing the largest price depreciation.

[diva]

[rawb]

Originally Posted by diva

Going to go on record with a prediction of a 35-40% drop from Spring 2008's peak by 2011. Inflation adjusted. With the downtown condo market facing the largest price depreciation.

really? whats being shown now and classically is that the biggest fluctuation is with suburban areas, esp areas far away from business centers and transit. generally places in high demand do not get hit by fluctuations that hard unless the entire city's industry rolls over and dies.

i have a hard time believing my place will drop $200000 in that amount of time!

[NinjaBoy]

Originally Posted by diva

Going to go on record with a prediction of a 35-40% drop from Spring 2008's peak by 2011. Inflation adjusted. With the downtown condo market facing the largest price depreciation.

Although I could understand a drop in housing prices (don't agree though), 40% is unheard of in a three year period...

[diva]

Really? I'm sure the people who bought during the last bubbles didn't think their places would depreciate in that amount of time either. We're heading into the largest price run-up, like, ever.

http://cuer.sauder.ubc.ca/cma/data/H...-vancouver.pdf

Of course, interest rates were very high back then. 18% I believe. But what people fail to consider is that an increase in interest rates from 4% to 8%, is the same thing as interest rates going from 9% to 18%. People living in this city are maxed out. There are no first time buyers either left to buy, or willing to buy into this market right now. The greater fools are drying up by the minute. I guess consumer confidence/market psychology has a lot to do with this as well.

As for the Canada not having subprime. Yeah, we don't. But we introduced zero down 40 year mortgages. The majority for first time buyers over the last few years chose this option. So basically anyone who bought last year with zero down already has an upside down mortgage. Kind of like the subprime debacle.

Vancouver is one of the largest real estate bubbles in North America. People living here don't even begin to make the money needed to afford homes/condos here. When it comes down to it, that's the issue here. Incomes in this city don't justify the prices. That's why they'll correct. They have in the past, and I really don't see how this time is different. I can understand that people will always want to pay a premium to live in Vancouver. It's gorgeous here. 20% premium I can understand. Maybe even 30% premium. But to pay upwards of double what other people in this country are paying for home is ridiculous. Vancouver wants to consider itself a world class city like NY and London, but what industries do we have here to fuel these high costs of living? Vancouver is just a pretty face for now.

The MSM is behind in reporting accurate info about our housing bubble because their advertising revenue is heavily based on the real estate industry. Six months ago, analysts at the top banks were predicting 7% price increases this year. Not anymore. Now they're calling for a "soft landing"...

And finally, it might just come down to supply and demand. Prices probably wouldn't plummet that drastically if everybody and their dog hadn't had such a hard on for real estate over the last six years. Now everyone's a property developer. Way too much supply coming up in the downtown core. Where are the buyers? When a young professional making 75-80kk a year can't afford to own a condo downtown, you know that prices need to correct. "How much is your home worth? Only what people are willing to pay for it."


Depreciation of city condos expected to exceed that of suburban houses

It's just my prediction when it comes down to it. Maybe Vancouver is different.

[diva]

Originally Posted by NinjaBoy

Although I could understand a drop in housing prices (don't agree though), 40% is unheard of in a three year period...

Check out the graph I posted. How long did it take for people who bought during the last two bubbles to recoup their loses? I'm not the only one predicting this number. People who know a lot more about this stuff that I do are predicting worse. Like I said, It's just a prediction. If it doesn't happen, it doesn't happen. It's different here. Best place on earth. <3

[rawb]

Originally Posted by diva

Really? I'm sure the people who bought during the last bubbles didn't think their places would depreciate in that amount of time either.

Which doesn't mean anything. People who would benefit from prices going down have predicted real estate crashing hard for a long long time. The market doesn't move by the collective wills of those who would benefit from it.

Comparing the vancouver of 1981 to the vancouver of today is laughable for a bunch of reasons, our economic and international profile is infinitely stronger. There are plenty of people buying, just not speculative flippers anymore. With our shitty transit system and the price of gas still insane after a 0.50 cent drop, people will be moving closer and closer to where they work and entertain themselves.

interest rates going from 4-8% is nothing like 9-18%, do you have any financial holdings in terms of stocks or property?

during this horrible bubble burst i have lost maybe 5% off the insane peak prices units in my building are going for. i get constant updates for the area and the units around me and while things have slowed people are buying homes still. 2008 condo developments are 90% sold out. 2009 condo developments are 93% sold out. 2010 condo developments are 83% sold out.

if our zero down mortgages are so bad, where are the people defaulting? why are units selling? where is the depreciation? i mean, yes, now it takes you 1 month to sell something instead of 3 days, but blanket statements like "There are no first time buyers either left to buy, or willing to buy into this market right now." or "The majority for first time buyers over the last few years chose this option. So basically anyone who bought last year with zero down already has an upside down mortgage." has no basis in reality. there is no statistical foundation for it and its either made up or copied from some blog.

i know you like the greater fool guy and ive met the dude and sat in a talk by him as he explains with glee how vancouver will be a smoldering pile of ash in 3 years, but if you balance out your reading with other financial analysts and reports there is just as compelling views on the other side.

yes we are in a decline, but i think you are applying other peoples thinking into creating a conclusion and not making up your own mind.

[diva]

Originally Posted by rawb

Which doesn't mean anything. People who would benefit from prices going down have predicted real estate crashing hard for a long long time. The market doesn't move by the collective wills of those who would benefit from it.

Comparing the vancouver of 1981 to the vancouver of today is laughable for a bunch of reasons, our economic and international profile is infinitely stronger. There are plenty of people buying, just not speculative flippers anymore. With our shitty transit system and the price of gas still insane after a 0.50 cent drop, people will be moving closer and closer to where they work and entertain themselves.

interest rates going from 4-8% is nothing like 9-18%, do you have any financial holdings in terms of stocks or property?

during this horrible bubble burst i have lost maybe 5% off the insane peak prices units in my building are going for. i get constant updates for the area and the units around me and while things have slowed people are buying homes still. 2008 condo developments are 90% sold out. 2009 condo developments are 93% sold out. 2010 condo developments are 83% sold out.

if our zero down mortgages are so bad, where are the people defaulting? why are units selling? where is the depreciation? i mean, yes, now it takes you 1 month to sell something instead of 3 days, but blanket statements like "There are no first time buyers either left to buy, or willing to buy into this market right now." or "The majority for first time buyers over the last few years chose this option. So basically anyone who bought last year with zero down already has an upside down mortgage." has no basis in reality. there is no statistical foundation for it and its either made up or copied from some blog.

i know you like the greater fool guy and ive met the dude and sat in a talk by him as he explains with glee how vancouver will be a smoldering pile of ash in 3 years, but if you balance out your reading with other financial analysts and reports there is just as compelling views on the other side.

yes we are in a decline, but i think you are applying other peoples thinking into creating a conclusion and not making up your own mind.

do you have any financial holdings in terms of stocks or property?

You're joking, right? WEAK. You must be joking here. That would be like me telling you that you couldn't even begin to understand the value of an education because you never went to university. I make close to $80,000/year and invest exactly 15% of my income. Do you really think you get to talk down to me because you own a place?

You think I'm not making up my own mind? Well I think that you have a lot to lose, so of course you're not going to be objective about this either. I'll be able to buy in Vancouver regardless, so I think I have a bit more objectivity than you do. You've bought into the bubble. Who's giving you your information? Keep drinking the real estate kool-aide.

You assume that I don't know what I'm taking about and get all my talking points from bullshit blogs. You must really think you're one of the only people in this world who has a clue about this this topic.

Where are you getting these pre-sale figures from? There are not plenty of people buying. That is false. How can there be plenty of people buying? Where is the money coming from? Incomes are not in line with prices. Subprime and zero down mortgages aside, where are these people getting the money from? What high paying jobs are in Vancouver?

The market doesn't move by the collective wills of those who would benefit from it.

You're right it doesn't. You can't will the market into a soft landing either. It moves with the fundamentals. The fundamentals of this housing market are weak. Houses are only worth what people will pay for them. The only reason people were paying so much for these places in the first place was because they were betting on significant appreciation. Median prices need to reflect median incomes.

Garth Turner's greater fool rhetoric aside. Intelligent people in the financial industry who are not heavily invested in real estate all say the same thing.

"Robert Schiller is a Yale professor, and author of Irrational Exuberance, which forecasted the stock market bubble and subsequent bust. This very high real estate market in North America was a function of low interest rates, creative mortgage financing, and irrational expectations. Professor Schiller, interviewed recently on Report on Business television from his office at Yale University, went on to pick out Vancouver, B.C. as having one of the most out-of-line real estate prices in the world. The U.S. market has already collapsed, but here in Vancouver we think we are special." -- An article by Bob Thompson - The Tri-City News - March 20, 2008. The article I copied this quote from back in April isn't online anymore (http://www.bclocalnews.com/business/16872171.html), but you can probably find it in some archive.

Here's another graph.

http://www.investingintelligently.co...ome_values.png

The graph is by Rober Shiller, a Yale Economist who predicted the dot-com bust, as well as the current US housing bust. Mr. Shiller believes that Vancouver is one of the world's bubbliest cities. He's also the author of a book called Irrational Exuberance (a term used to describe "a heightened state of speculative fervor").

"Published at the height of the dot-com boom, it put forth several arguments demonstrating how the stock markets were overvalued at the time. Shiller was soon proven right when the Nasdaq peaked on the very month of the book's publication, and the stock markets collapsed right after.

The second edition of Irrational Exuberance published in 2005 is updated to cover the housing bubble, especially in the United States. Shiller writes that the real estate bubble may soon burst, and he supports his claim by showing that median home prices are now six to nine times greater than median income in some areas of the country. He also shows that home prices, when adjusted for inflation, have produced very modest returns of less than 1%/year."

wiki page: Irrational Exuberance - Wikipedia, the free encyclopedia

There currently no where for this market to go but down. Vancouver has one of the largest bubbles in history right now. I didn't say it had crashed. I said it was going to crash. And it will. There will be no soft landing in this city.

How is Vancouver's economic profile stronger? Are people taking home more money than they were twenty years ago?

-------------------------------------------------
The next bit is copied and pasted from a Facebook note I wrote back in April.

http://cuer.sauder.ubc.ca/cma/data/H...-vancouver.pdf

Basically this graph is saying that anyone who bought a home in 1981 (before that bubble burst), would have had to wait until 2005 to break even. 24 years.

Just think about this for a second. If the market is peaking in terms of price to rent ratios, and it probably is because right now the cost to rent an equivalent unit is 1:3 the cost to buy, then the market will probably correct itself back to realistic ratios closer to 1:1. It pretty much always does.

I keep hearing from people who aren't affiliated with the real estate industry, and therefore do not stand to make money as long as current prices remain overinflated, that the smart thing to do is sell now, rent for 5-6 years while the market declines, and buy again at the bottom. The financial case for renting right now is overwhelming.

I also keep hearing that despite what a lot of people say, real estate cycles are surprisingly predictable. They last about 10-12 years peak-to-peak, which means 5-6 years from peak to valley. The last time real estate peaked in Vancouver was 1995 (according to the graph I've just linked to). If you bought then, you would have had to wait until 2003 just to break even.

And that doesn’t even include mortgage interest, maintenance, insurance, property taxes, realtor fees, etc. Not to mention the fact that most people fail to account for inflation when calculating their RE investment returns.

[This information was shared with me from the guys over at Vancouver Condo Info


-----------------------------------------

But like you said before. Getting information from a bullshit blog written by an educated person with nothing to lose in this market can't possibly be better than getting your information from members of your local real estate board. <---glorified, overpaid equivalents of used car salespeople.

People who would benefit from prices going down have predicted real estate crashing hard for a long long time.

Oh really? Isn't that kind of like how people who would benefit from prices remaining over-inflated have been predicting the exact opposite? Interesting.

----------------------------------------------------
I really need to revisit this quote again:

interest rates going from 4-8% is nothing like 9-18%, do you have any financial holdings in terms of stocks or property?

Calculate the payments for a $250,000 at 4% interest over 25 years. Then Calculate how much more percentage wise someone would pay if the interest rates shot up to 8%. Then use the same $250,000 with 9% and 18% interest rates.

I'll do the math for you.
Family A--
4%-$1319/month
8%-$1929.54/month

Family b--
9%-$2097.99/month
18%-$3793.57/month

So Family B's montly mortgage payments actually rose by a smaller percentage (55%) than Family A's (68%). That's what I meant by that statement.
-----------------------------------------

Anyhoo, I have nothing to lose. It's just a prediction. The voices in my head are probably wrong. Again. <3

[stephen_c]

tl;dr

say hi to flipper.

[rawb]

What's your deal Esi? This is the second time I've disagreed with you on something this week, tried to discuss it normally, and you come back with ad hominem attacks out of left field.

Not really into not having an adult discussion, sorry.

[diva]

Would also like to add that, because of the residential real estate (condo) boom, downtown is very quickly running out of room for any new commercial real estate. Large companies are running out of downtown office space options. So, it looks large influx of people looking to save money by moving closer to work wont be moving downtown.

I didn't get that info from a blog. Or Garth Turner. <3

[rawb]

Originally Posted by diva

Would also like to add that, because of the residential real estate (condo) boom, downtown is very quickly running out of room for any new commercial real estate. Large companies are running out of downtown office space options. So, it looks large influx of people looking to save money by moving closer to work wont be moving downtown.

I didn't get that info from a blog. Or Garth Turner. <3

again, no stats, no figures, no research.

after considering burnaby and richmond, my company is negotiating a lease for 6-10k sq ft of office space in downtown vancouver just to convert into a datacenter. we've been talking to multiple landlords all over downtown.

office space is not that hard to find and its not that expensive.

[tiedye]

Life must rock when the universe revolves around your own assumptions.

[rawb]

My parents bought their home in 1980 just before the crash in 1981 and their mortgage rate was just over 20%, amazing how they didn't have to kill one of their kids to survive that obv end of the world : P

[diva]

Calling someone's argument "weak" and pointing out that they are talking down to me is an ad hominem attack? Can't you just admit you have no more economic background knowledge from which to work than I do?

Your rebuttal to my commercial real estate argument was weak too. The whole urban ecodensity movement is kind of backfiring. Large companies do not have room to grow with all the residential real estate in the downtown core. I never said that office space was expensive. But it is hard to find downtown.

What name did I call you? What insult did I fling at you? I gave you a lot of factual analysis that you obviously won't read because you're unwilling to admit thousands of people in this city have made ridiculusly poor financial decisions when it comes to real estate.

It's pretty sad that you've got nothing except the regular pablum to
contribute to this argument. "It's different this time." "Vancouver has a better international profile than in 1981"
(since when does a city's "international profile" determine the market
price of housing?)

You've already admitted to losing about 5% off the top of the value of your condo. What makes you think that even as the Canadian Government has started to pre-emptively buy up mortgages from Canadian Banks, that all of a sudden the bleeding is going to stop?

What makes Vancouver special? It doesn't offer the incomes that Calgary and Toronto do, yet they have both fallen well over 10% from their peaks and we aren't even in a recession yet.

Credit is tightening up. Banks will no longer approve a mortgage application that exceeds 32.8% gross debt servicing ratio. [You calculate this by monthly mortgage payment / gross monthly income.]

Since the average 1BR condo price in downtown Vancouver is in excess of $350,000.00 and the monthly mortgage cost of a mortgage that size is in excess of $2,200.00, please tell me what average person can afford that without drastically over-leveraging themselves?

Come up with logically accurate assertions about why the fundamentals of this boom are only weak enough to result in a soft landing for all the fucked buyers. Like I said a few times before, where is the money coming from? What is Vancouver's economy based on?
Why did the market go so crazy? What fundamentals lead to the unpresidented increase in real estate prices? What's going to prop the market up? Net migration isn't any higher than it was in the 80s. I do not believe that there's an increased demand for all of these condos. I don't see retired baby boomers moving to Yaletown or Coal Harbour.

http://cuer.sauder.ubc.ca/cma/data/P...-vancouver.pdf

http://cuer.sauder.ubc.ca/cma/data/M...igrationBC.pdf

The rich Asian buyers who never existed in the first place are long gone. And if they did exist, their money is long gone.

Speculators fueled the boom. Banks lent them money because they used equity from their primary residences as collateral for their loans. First time buyers cannot afford current prices. No bank is going to lend someone making $50,000/year money to buy a $350,000 condo. No bank is going to lend a family making $80,000/year the money to buy a $600,000 house. No first time buyers means that people currently living in their first homes can't trade up. First time buyers are an essential part of the real estate cycle. They no longer exist in Vancouver's RE market.

reportonbusiness.com: globeinvestor.com - Canada could face housing woes, Merrill warns

The funny thing is that I didn't even say this is definitely what's going to happen. I simply made a prediction and supported it with a cohesive argument. The only reason you're attacking my opinion is because you've bought into the real estate craze. What's going to happen to me if I'm wrong? Not a damn thing. Come 2011 I'll be making 90k/year and wont need my parents to help me buy a 500 sq. ft. condo in Vancouver. If you end up being right and prices don't correct as much as I've predicted I'll just continue to rent the sweet as condo I live in now. I will never buy an overpriced condo when I can rent it for a lot cheaper and invest my remaining cash into other financial vehicles.

http://cuer.sauder.ubc.ca/cma/data/R...x/van-real.pdf

What's your deal rawb? I don't have a problem with us disagreeing on this topic. My close friends and I disagree on this topic. We discuss it all the time. When things start to get uncomfortable, as they often do when people have a large amount of money invested in something, we just politely agree to disagree. They never tell me that I can't possibly know anything about the real estate market because I don't own property. I'm not the type to get upset about someone disagreeing with me. But you continue to undermine my ability to sort through bullshit sources and form my own opinion. That's my problem.

[rawb]

Originally Posted by diva

Calling someone's argument "weak" and pointing out that they are talking down to me is an ad hominem attack? Can't you just admit you have no more economic background knowledge from which to work than I do?

My bad, how much property do you own Esi?

Your rebuttal to my commercial real estate argument was weak too. The whole urban ecodensity movement is kind of backfiring. Large companies do not have room to grow with all the residential real estate in the downtown core. I never said that office space was expensive. But it is hard to find downtown.

Really? My experience is the exact opposite, since my company is negotiating with multiple landlords to lease out entire floors of downtown buildings, with options for more. Do you have any data?

What name did I call you? What insult did I fling at you? I gave you a lot of factual analysis that you obviously won't read because you're unwilling to admit thousands of people in this city have made ridiculusly poor financial decisions when it comes to real estate.

i didn't get to the rest through your anger, wasn't worth it. if you think i slighted you im sorry, but you seem to thrive on incredibly emotional responses when people challenge your opinion. like i said this isn't the first time and i don't want to escalate something that will make you have a weird vandetta against me.

It's pretty sad that you've got nothing except the regular pablum to
contribute to this argument. "It's different this time." "Vancouver has a better international profile than in 1981"
(since when does a city's "international profile" determine the market
price of housing?)

are we arguing the same thing? im saying that a 40% drop in real estate doesn't seem right to me. you're arguing that magically vancouver real estate will suck because it sucked in 1981.

You've already admitted to losing about 5% off the top of the value of your condo. What makes you think that even as the Canadian Government has started to pre-emptively buy up mortgages from Canadian Banks, that all of a sudden the bleeding is going to stop?

5% is very far from 40%. the states had a gigantic mortgage crisis with people defaulting left, right and center, and it was rare for their prices to fall that much.

Since the average 1BR condo price in downtown Vancouver is in excess of $350,000.00 and the monthly mortgage cost of a mortgage that size is in excess of $2,200.00, please tell me what average person can afford that without drastically over-leveraging themselves?

their monthly payment is based on their mortgage term, and i think you will find most people downtown who have bought have a longer term mortgage.

for a 350,000 condo with 10% down and going by my mortgage rate (4.6%), you're paying $1500/mo on a 35 year mortgage, which is consistent with rental rates.

The only reason you're attacking my opinion is because you've bought into the real estate craze. What's going to happen to me if I'm wrong? Not a damn thing. Come 2011 I'll be making 90k/year and wont need my parents to help me buy a 500 sq. ft. condo in Vancouver. If you end up being right and prices don't correct as much as I've predicted I'll just continue to rent the sweet as condo I live in now. I will never buy an overpriced condo when I can rent it for a lot cheaper and invest my remaining cash into other financial vehicles.

What does this have to do with anything? This is the second time in the thread you've played the "justify your life" game.

What's your deal rawb? I don't have a problem with us disagreeing on this topic.

I'm not the type to get upset about someone disagreeing with me.

[Courtney]

i'm never owning a house in vancouver cuz i'm broke and THATS the real issue here guys

[robyn]

guys i need you to stop arguing and speculate on how much a weird, clapping ghost is going to affect my resale value

[cubed]

what's the ghost wearing?

[stephen_c]

Originally Posted by robyn

guys i need you to stop arguing and speculate on how much a weird, clapping ghost is going to affect my resale value

clapping???

dead flipper maybe?