BawldGuy Talking

Some argue that Vancouver real estate tracks certain Southern California markets.  There may be merit to the argument, and it certainly raises some interesting questions. For example, in what way do we track the market in question?  Simply in terms of price, or are there other, more important underlying similarities?

I find US real estate interesting, but of course I’m not referring to recent price ups and downs.  Its organized real estate in the States that grabs me.  Americans often come up with ideas that simply don’t work here.  Sometimes they are clearly ahead of the wave that is about to wash up on our shore.

That’s one reason I find Jeff Brown interesting.   There are some who think that anyone in real estate has an interest in pumping their local market.   The idea strikes me as naive, but I’m unlikely to change many minds.  Take a look, however, at Thursday’s post on Jeff’s blog where he talks about San Diego income properties and the future.

Is Jeff completely crazy? He seems to be saying that San Diego income properties will not return to a pricing level in line with fundamentals. Are there any parallels for Vancouver, or for Canada?

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11 Comments

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11 responses to “BawldGuy Talking

  1. Thanks so much for the kind words.

    If indeed San Diego’s income properties fall back to reasonable fundamentals, it will have included blood in the streets. There’s simply no plausible scenario recommending San Diego as an income property investment destination.

    Thanks again — BawldGuy

  2. Strataman

    I think Jeff has spotted something we in Vancouver overlook, who is buying and when, he claims to represent serious investors, which I have no reason to doubt. Although not an exact parallel Vancouver too I believe has a changing investor character. I deal with many Asian and American investors who seem to have lost interest in this market. Most, if not all, have no mortgage on the homes they have here they are selling generally at substantial gain to new “first time owner investors”. Sometimes they even take a loss without, it appears being even slightly perturbed. By a loss I mean they sell to the first buyer as they do not appear to want to waste time getting an extra $20 to 60 grand, as they have other more pressing goals. I have also talked to many of them and the overall opinion is Vancouver is just not what they thought it was, sort of boring is the feeling I get from them. I cannot believe the amount of Asian investors that are leaving for international greener hills. Americans too seem to be looking in other places, after having experienced a few years here. The question is are the new buyers aware, that they may actually be facing a 25 year mortgage, rising maintenance fees, and little or small capital appreciation? I doubt it, most I talk to are counting on 10 to 15 % growth in value each year.

  3. Annon

    I wouldn’t worry too much about those who bought houses at high prices now and may have to suffer slow equity growth. It’s good if the house value grows at their desired rate. It’s sad if it doesn’t or even drops in value. Everyone is responsible for their own actions and the end of world won’t come just because the house value drops. I mean the worst is for them to work harder, save more, or just give up the house. No one is going die or whatever.

  4. I guess I don’t understand the fundamentals in “BG’s” argument. If buyers are moving on from a particular market, how do prices not react negatively?

    On another note, US dollar at a what, a 30 yr low against the CAD today? Any local appreciation enjoyed by US based investors in the last 2 years has been negated by the exchange rate. This must be showing up in the numbers of US buyer locally, but then, I don’t know what sort of weight they ever had anyway. Any insights, Rob?

  5. Snick

    I find Robert Campbell’s San Diego to be as equally interesting.

  6. robchipman

    I get a couple comments from American clients. One is that they bought here as a hedge against currency drop, meaning they bought more than 2 years ago and have profitted the other way. The other is that Vancouver is not a good investment location, and that they buy here despite that. My American clients are either very long term (15 years +) and own in various areas of the Lower Mainland, or are more recent and are in the Coal Harbour area (anecdotally a very attractive area for them).

  7. ex-suburb

    BC Developer breaks housing development contract to relist the properties at a higher price (current market value)… Kicker is that the wife of the developer is the selling agent…

    http://tinyurl.com/2dyt69

    [Note From Rob: This comment has spawned its own post ]

  8. robchipman

    Snick:

    Are you serious about Robert Campbell? He’s news to me, and seems slightly/greatly different from Jeff Brown. Some web research points to snake oil, and other research points to the real deal. Any insight is appreciated.

  9. scoop

    I’m with ceejay. Jeff seems to think that prices will continue to dramatically rise even as they further erode demand. What are we missing here?

  10. Snick

    Rob,

    If there is ANYONE who knows about the RE market in San Diego, it is Robert Campbell.

    He wrote, “Timing the Real Estate Market”.

    Google the book titile ad click on the part where it says “Free Preview”. His explanations of SD (and other) RE cycles is quite interesting.

  11. robchipman

    scoop:

    I think that Jeff assumes exactly the opposite of what you say. He starts the post by saying “For those who’ve decided to hang in there for the next rise, read on. Your future is nowhere near what you may think.” I think he’s arguing that prices have reached a level in San Diego such that, and other RE buying opportunities have become so accessible that, rational investors will not buy San Diego income properties. Those properties will recover some value, and will hold value, for a variety of reasons, but won’t shoot up the way SFH may continue to do (key differences: buyers for investment property can go elsewhere and are less emotional/more rational, while SFH buyers are locked into an area and can be irrational).

    ceejay:

    I think what he’s saying is that the positive pressure from investor buyers may recede, but overflow pressure from the balance of the market and from some investors will continue. Its true that some investors will pay a premium for some properties and accept lower returns. Not all will. I think that if you add those things together you get poor appreciation, but not retrenchment. You want a SFH, so you pay more. Someone offers you a triplex and you say “I don’t want two tenants living beside me, and besides, I can’t afford that much, give me the SFH.” But, if the triplex cost falls enough you’ll reconsider, which is a positive impact for the triplex price. Not enough to make it a great investment for the non-emotional rational investor, but enough to keep prices from collapsing.

    Annon:

    Its not about an investor not getting as much as he wants. Its about an investor leaving the old model of buy and hold and embracing a new model of chase growth across the continent.

    Snick:

    Thanks, will do.

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