Monday Numbers

There were 256 new listings today and 214 sales, for a sell/list of 83.59%. Of the sales 33, or 15.42%, went over list. 12 of those were on the Westside. 6 were in East Van, 4 were in Richmond, 1 in Port Coquitlam, 1 in Port Moody, 1 in New West, 2 in North Van, 1 in Coquitlam and 5 in Burnaby.

Average list price of the sales was $538,767, while the average sales price was $531,551, a difference of $7,216, meaning the average sale went for 1.67% under list price. 20 properties went for list price. One property went for 14%($65,000) under list while the highest over list was 14% ($117,000) over . Average days on market to sale was 29 (yes, twenty-nine).

There were 11 million dollar plus properties sold with one over $2 million.

There were 109 price changes, of which 13, or 11.93%, were increases. The average original list price of price changes was $607,126; the average new price was $589,074, a difference of $18,052, meaning the average price change was -2.51%. Average days on market to price change was 50 days. 0.78% of all listings reduced their prices today.

Inventory in my target area dropped to 12,374 while over 90s also dropped, reaching 2,130, or 17.21%. The 14 day rolling sell/list is on the way back up, reaching 71.02%.

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58 Comments

Filed under Daily Numbers

58 responses to “Monday Numbers

  1. Domus

    This is for Mike, who asked questions about the US in the previous thread. Just out of today’s Bloomberg:

    ” June 26 (Bloomberg) — Consumer confidence in the U.S. dropped more than forecast and two other reports signaled that demand for houses is still falling in the second year of the home-building slowdown.

    The New York-based Conference Board’s index of consumer confidence fell to 103.9 in June from a revised 108.5 the prior month. Purchases of new homes fell 1.6 percent last month to an annual pace of 915,000, the Commerce Department reported in Washington, and housing prices in 20 cities in April fell by the most in at least six years, according to S&P/Case-Shiller. ”

    Keep in mind that the US economy is still growing overall and unemplyment is well below 5%.

  2. awum

    Y’know, if you focus on the sell/list ratio, it looks like a bit of a bear/bull roller coaster. Sales have remained pretty darn steady throughout June, however, and are still just about par with last June.

    I never said the market was tanking, by the way, Rob. I just pointed out that you should take high sales as a guarantee that it isn’t. And I stand by my common sense assertions that (a) there are more quality listings out there simply because there is more inventory, and (b) there is more “junk” as well. This can continue for a while, but at some point either sales pick up to absorb the inventory or the correction happens. I think the former is unlikely, just because we have got the highest inventory in a number of years and I think all the signs point in the other direction.

    You can point to your over 90s all you want, but you can’t read too much into that. The number of over 90s is affected by numerous factors, including general level of inventory, periods of high (or low) influx of inventory, relisting of expired listings, seller motivation, time of year, etc. The worst thing anyone can do is try to draw a connection between “over 90s” and “days on market before a sale.” It’s like comparing old apples to young oranges.

    When we had this level of inventory and lower sales last fall, price growth stalled. I think this market may respond to supply/demand forces more quickly than most expect — at least initially.

  3. Gadwin

    awum wrote:
    >This can continue for a while, but at some point
    >either sales pick up to absorb the inventory or
    >the correction happens

    Yes, this is simple supply and demand. If sales stays steady and the supply is not absorbed, there will be downward pressure on the price. Note that “downward pressure” does not necessarily mean a price drop, but it could mean less price appreciation.

  4. awum

    Too true, Gadwin.

    I’m going to watch the rate of price appreciation in FVREB’s apartments over the next few months. These properties saw some absolutely ludicrous appreciation in the last couple of years so IMHO, that should be the softest part of this market, and the most prone to downward pressure. I’m betting on some dramatic decreases in YoY appreciation over the next few months.

  5. realitycheck

    Gadwin, I don’t think anyone is arguing that there will be less price appreciation. The appreciation of the past few years is absolutely not sustainable. There is a big difference however between less appreciation and substantial depreciation. I believe bears are hoping for the latter and many believe it is a certainty.

  6. robchipman

    Awum:

    “…but at some point either sales pick up to absorb the inventory or the correction happens”…or the excess inventory expires. Supply gets taken care of two ways. It sells or expires. And, there is no “best before date”. Right now we assume that propreties should all sell quickly. That isn’t always the case.

    Price drops (or as Gadwin rightly points out “downward pressures” ) depend more on the supply of “must sells” than merely on supply.

    I think over 90s a DOMs are quite important (call me crazy!) If over 90s are staying relatively stable, and if DOMs are low, low low (which they are), you have to think that the young apples are selling quickly, and that the old oranges are tending to leave the market rather than hang around.

    You might argue that many of the expiries just get re-listed. The implications of that are tough to nail down: does yesterday’s 29 DOM consist of a new listing selling in 1 day and another selling in 57 days, or of a listing selling in 1 day and another selling 57 days after its 2nd or third listing? Either way, the 57 (or 147, 237) DOM listing clearly doesn’t belong to a “must sell”, and I think low over DOM numbers indicate this.

  7. awum

    DOM talks about the listings that sell. It’s a subset of all the listings. Over 90s talks about the listings that don’t sell. A separate subset.

    I’m not saying the numbers aren’t interesting, and I don’t think they are without value. I just don’t think they are anywhere near as solid as the things you can’t argue with: the # of sales, the amount of inventory, and to a lesser degree, the price (I’m leaving room for the whole average/median/HPI argument there). There are definite reasons to be wary of them (here’s just a few):

    (1) I recall a news story not long ago about a realtor who relisted a long-listed property after arranging a sale below asking price. As a stat, that showed up as a quick sale at asking price, when it should have showed as a slow sale below asking. You can say “oh, that doesn’t happen much I’m sure” all you want but three facts remain: (a) there are easy-to-understand motivations for agents to do this, (b) it is easy to do this without people noticing and (c) there are few negative consequences (when the real estate board in that case found out, they did not find it was unethical.) I’d have to say any guesses at how frequently you think that occurs are an underestimate.

    (2) As all us rireb-o-philes know, there are expiries throughout the month, and a good 3-4% or so expire at the end of each month. We know that some of those get re-listed, hence zeroing the listing’s age and bringing down the over 90’s (and potentially DOM if they do finally sell), but we have no idea how many.

    (3) Think about it; there is no reason why you can’t get low DOM numbers while lots of listings get no play at all. Plus, it is exactly those listings that get no play that will expire and get relisted.

    (4) Without knowing the average age of the listings on the market (and the real age, not the age since re-listing) you have no real basis from which to interpret the numbers.

    As for your comment “Price drops (or as Gadwin rightly points out “downward pressures” ) depend more on the supply of “must sells” than merely on supply. ” I think you are confusing a seller taking less than another seller did a month ago, with a seller taking a loss. Prices can drop (though perhaps not dramatically) without “must sells” easily. It not only can happen, it has happened, and you have seen exactly that over the short term in parts of this market several times even in the middle of the current 2002-2007 run-up. The effect needs more MoI in more places to really dent the market, though.

  8. robchipman

    Awum:

    “I think you are confusing a seller taking less than another seller did a month ago, with a seller taking a loss.”

    Fair point. And you’re right, we’ve seen it happen. However, that kind of selling doesn’t translate into pain or opportunity for people who think the market is over-priced now.

    “Prices can drop (though perhaps not dramatically) without “must sells” easily”. Again, fair point, but you’re getting “easy” price drops by accepting less than dramatic price drops.

    I don’t think anyone around here would upset by a 5% drop in values, except the bears.

    I don’t think many people would mourn a 10% drop, except, again, the bears.

  9. Anonymous

    10% takes us back to when…. January 2007 ?

  10. awum

    I don’t think anyone around here would upset by a 5% drop in values, except the bears.

    I don’t think many people would mourn a 10% drop, except, again, the bears.

    Maybe, maybe. But (1) that’s how psychology turns, (2) that’s how you start pushing out speculators counting on quick returns, (3) that doesn’t help someone like me who needs to see 6% annual growth just to stay even with renting, and (4) someone who just watched a 10% downpayment evaporate might disagree with you.

    Still, I agree it is at best a small step, but it could be just a first one. I honestly think we could be at less than the 8% growth predicted by {whoever it was} at the end of this year.

  11. robchipman

    Awum:

    How do you figure you need 6% annual growth just to stay even with renting?

  12. General Zod

    Interesting discussion on NPR. First thing, study shows RE prices in the US since before the 1900’s have always followed inflation. Anything more is a bubble.

    http://www.npr.org/templates/story/story.php?storyId=11361676

  13. Domus

    …and, to add some flair, here is another cut from today’s Bloomberg:

    ” Shiller, Economist, Sees `Soft’ Real Estate for `Years to Come’ ”

    On Bloomberg.com there is a link to his interview. The guy has a great track record for getting it right.

  14. Domus

    fish: great link.

    I am listening to it now. I strongly suggest it to Vancouverites……

  15. General Zod

    great quote, “the places with the biggest run-ups are likely to have the biggest fall” – Dean Baker, economist and co-director of the Center for Economic and Policy Research

  16. awum

    How do you figure you need 6% annual growth just to stay even with renting?

    Are you kidding? Simple rent vs. own calculation.

    I’m renting a big, bright 2-bedroom in the West End on the 8th floor with views of False Creek, Kits Point and Jericho Beach. My rent is a little over $1200 per month, but it’s going up $50 a month in the fall. I walk to work.

    I have calculated the difference between what I pay in rent and what I would have to pay to buy a two-bedroom condo with the highest mortgage I could carry.

    Now, ignoring the fact that I’d now be living with a view of Kingsway or a sketchy part of the Fraser River instead, I factored in income tax, borrowing costs, assumed a conservative 4% return on the investments I’m making instead of buying a home, factored in costs of each option, et voila! I need about 6% annual appreciation on the value of my home to break even with renting.

    To do a fair calculation, I’d actually have to use the borrowing costs to buy a 2 bedroom in the West End, of course. But that just makes me giggle! There’s a 2 bedroom condo going for $348,000 on MLS that brags about renting for $975 a month. I doubt that guy’s renter is thinking about buying the place, even if he is making the $90K salary he’d need to qualify for the mortgage.

    OK, now I am giggling…

  17. robchipman

    Here’s another quote from him:

    “We’ll if you’ve seen houses fall in price then, you know, a lot, I mean, what you describe there, you know, I don’t know how typical that is, but if you’ve actually seen a house fall 30%, 40%….then that might be a situation which it makes sense to buy…Housing is not always a good investment. A lot of people have taken a very big hit on housing. And, you know, I’ll just go back to the ’90s when it was just, you know, people would speak it like it was the absolute gospel truth that the stock market always went up over any long period. Sorry, that’s just not true. I don’t care what, you know, your investment advisor told you, you can lose money on housing”

    Is that the same as saying its not typical to see 30-%-40% reversals in real estate, and that the stock market doesn’t go up long term? But if housing is depressed 40% it “might” make sense to buy?

    (Forget about justifying “a lot of people have taken a very big hit on housing” by referring to the stock market – we know the guy’s heart is in the right place).

    To be fair, Baker feels that rents prices barely outpaced inflation, while house prices have smoked inflation. Still, I didn’t find Baker too impressive. He certainly got a lot of mileage out of simple advice (buying at the peak can hurt, housing can go down).

    Ben Jones, on the other hand, made more sense in 2 minutes. (i% only mortgage = rent, since there is no principal paydown. MOTO award).

    The Michigan appraiser was also interesting. 2 years on the market in his Michigan resort town.

    Ilyce Glink – the majority of Realtors have never seen a down market and don’t know how to sell in one (she made some other intelligent comments as well).

  18. awum

    …and yes, I also factored in rent increases.

  19. Domus

    Rob,

    are you serious with your last post?

    Baker simply said something very basic: you can lose money in any investment, including stocks (see Nasdaq in 2000).

    Then he pointed out that house prices have barely grown with inflation for the last century but they jumped by 70% (real) over the past 10 years.

    He finally connected the dots and said: I expect you might lose some serious money buying housing now.

    He even qualified his statement by saying that it might be good to buy now if prices are substantially lower (40% below peak, in his view).

    Now: let me spell it again for the listening public. RE investment has barely kept its real value over the past century. In the past 10 years RE inflation has far outpaced inflation.

    Can prices stay were they are in real terms (or go further up): yes, under one circumstance. That the world is different this time! Readers should judge weather that’s realistic.

    If you believe that history is any guide, then you know what’s brewing.

  20. zed

    Booyaksha Rob. Rob, if in a position to pay off a mortgage on a current home, would it be worthwhile to pick up a rental instead with 25% down?

  21. vintage

    Quote:
    …”How do you figure you need 6% annual growth just to stay even with renting?”…

    Am I that dense?
    Doesn’t the mortgage you’re taking out to buy your house come with a hefty pricetag called “interest”?
    If your rate is 6% annually (seems like a pretty typical mortgage rate nowadays) doesn’t your investment have to appreciate at the same yearly rate just to break even?
    You’re not renting a place to live, but you’re renting money to buy it, right?
    Unless of course you’re buying your place by paying in cash, in which case you don’t really care about all that rubbish, do you?

    Am I missing something here? Why would Rob of all people ask a question like that?

  22. Skeptic

    Vintage: “Am I that dense?”

    Maybe – you did ask 😉

    “Doesn’t the mortgage you’re taking out to buy your house come with a hefty pricetag called “interest”?
    If your rate is 6% annually (seems like a pretty typical mortgage rate nowadays) doesn’t your investment have to appreciate at the same yearly rate just to break even?”

    Only if you loan 100%. If you lend 75% you only need it to appreciate at 4.5% (and 3% for 50%). This is in the first year. Assuming it appreciates, by the power of compounding the amount it needs to appreciate each year reduces.

  23. Domus

    Skeptic,

    why don’t you include inflation in your calculations? You will see things change quite a bit.

  24. Skeptic

    Domus, inflation affects many things, including stock market investments and incomes, not just real estate.

  25. vintage

    Ha, so I am dense!
    Oh well, I guess that’s why I have ZERO personal debt and substantial cash savings. Kind of like Forrest Gump.

  26. I’m dense for sure. Great income and near zero savings. Oh well, off to Vegas. Or do I buy that condo…:)

  27. Domus

    “Domus, inflation affects many things, including stock market investments and incomes, not just real estate.”

    True, but the effects of inflation are:

    1) stronger for leveraged investments;
    2) very relevant when you deal with numbers of the size you mention, like 3%.

    All I am saying is that you should not exclude variables which do not support your argument. In this case your result is reversed even when you assume mild inflation because of the high leverage you mention.

  28. News Flash

    1. “Am I that dense?”

    2. “If your rate is 6% annually (seems like a pretty typical mortgage rate nowadays) doesn’t your investment have to appreciate at the same yearly rate just to break even?”

    Answer to second question NO because you collect rent in addition to capital appreciation (or save the rent you would pay if you live in the property).

    I won’t bother answering the first question.

  29. robchipman

    Domus, I just quoted the guy. He didn’t say “stocks go up and down”; he said the “the absolute gospel truth that the stock market always went up over any long period. Sorry, that’s just not true. ”
    You said:
    “One basic fact is that long time returns on equity is huge compared to housing. It is documented everywhere. You can try to discredit this fact as you want, but a fact it remains. ”
    and
    “this is an article from Forbes magazine (hardly a cave of bears….!) and it shows clearly that the historical truth is that stocks dominate (repeat: dominate) RE investment in terms of long-term returns”.
    Maybe Baker’s version of a long period is different from yours. Maybe stocks dominate real estate returns even when they’re droppping in value. I don’t know. But when I heard him say it, I thought of you.
    (Maybe upzoning Kits would make accomodation there more affordable – maybe somewhere in the $550/sq. ft. range for a condo rather the the $1 million dollar 2400 sq. ft. house – wait, the sq. ft. of SFH is cheaper and many places that have densified have gotten more expensive, but I’m off topic 🙂 )
    Aside from that Baker said what’s been said about a million times – all investments can lose money (no argument there, never was one) and that buying at a peak might be bad (he really went out on a limb there). He then expressed a little disbelief that a house could actually fall in value 40%, but allowed that if it did it “might” be a good time to buy. And he took the better part of 30 minutes to get that out and he couldn’t even use relevant examples! No wonder he’s an economist (lay all of them head to toe and they’ll still never reach a conclusion).
    Like I said: Ben Jones made more of an impression in 2 minutes, but I guess that’s why Ben Jones has more readers.
    Zed:
    If you can read the future then you already know the answer. If you’re like me then any property you can buy that cash flows at 25% down is worth examining. Good ones are not easy to come by nowadays. Home interest is not tax deductible, nor is CCA or maintenance, insurance, management, etc.
    Vintage:
    Maybe I’m the dense one. I know that I assume a 5% appreciation, long term, and I and my clients more than stay ahead. I guess we count money differently. What can I say? You do remind me though, that Baker said “If rent is throwing money away, then so is paying interest”. You’ll note that Ben Jones said something quite different. Awum’s kind of stacking the numbers in his favour. (BTW, I just rented a 1 bedroom for $2000 – first time I’ve gotten that kind of price, so a 2 bedroom in Kits is a winner. We’ve also got a duplex for sale (o.k, accepted subject offer) – bargain rent for tenants, who have paid for the property a couple times over. Its an attractive investment because the buyer can purchase, reno and up rents. Textbook).
    Inflation and real estate:
    I buy today for $100,000. 25% down. 75% mortgage. Inflation runs 2% per year. Property appreciates 5% per year. In 10 years the property is worth $155,000. I owe $55,000 on the mortgage. Rent covered mortgage, taxes and maintenance in year 1. After that rent climbed 2% per year. My mortgage payment is $469, but net rent (that part used for the mortgage alone) to $560. I’m $90 to the good each month.
    My equity is $155,000 – $55,000 = $100,000.
    I originally invested $25,000. I’ve got a profit of $75,000. Of course, the $25,000 of 10 years ago has to be, what, almost $30,000 to keep pace with inflation. So I really didn’t make $75,000 in ten years. I only made $70,000. Which is a 280% return over 10 years. (Of course, those numbers, based on 5% per year, are dwarfed by what you get during an upturn).
    And all I had to do was buy the right piece of property, put $25,000 in it and leave it there, and wait.
    Oh, and that $55,000 outstanding mortgage? Those are 10 year old numbers, and I’m paying them off with inflated dollars (dollars that buy less everywhere else, but actually buy more when paying off a mortgage – the $469 I pay each month in year 10 is only worth about $390 year 1 dollars).
    What do I do if the property has dropped in value over 10 years? Hmmmmm? How about collect my $90 per month and pay tax on it and don’t sell?
    Skeptic:
    Remember a 100% mortgage still has blended payments. It ends. Rent doesn’t. Rent, therefore, has to be lower. You pay a mortgage for 25 years. That sounds like a lot. But rent can be a life sentence. You have to decide: 25 years hard time or life sentence in a minimum security institution? The fact is that you always have a chance to get more money, but you can’t get more time. Choose wisely.

  30. Domus

    Rob,

    answer to your points.

    “Maybe stocks dominate real estate returns even when they’re droppping in value. ”

    yes, it is a FACT that stock returns dominate RE returns historically. It is actually taught in b-schools over North America. It is not questioned by economists or statisticians. Maybe only by realtors lately 😉

    I really wonder why you keep on going on about this. Baker did not say much about relative returns and there is a wealth of information for you to peruse from good sources.

    If you still want to question facts, I think I will let you do it this time. I can’t force it into your head……

    “Maybe upzoning Kits would make accomodation there more affordable – …….many places that have densified have gotten more expensive”

    Come on now! And maybe you know what their price would be today if they remained SFH???
    Oh, wait, I have a hunch…..maybe they would have been even more expensive than they are today…..

    “He then expressed a little disbelief that a house could actually fall in value 40%, but allowed that if it did it “might” be a good time to buy.”

    Rob, the guy just expressed disbelief that a house fell in value by 40% in 12 months! Elsewhere in the interview he said he expects even larger drops in real terms, but they usually take years to happen. I am of the same opinion: I don’t think Vancouver RE will be dramatically cheaper 12 months from now. I do believe it will be dramatically cheaper 4 years from now, though.

    Ah, and one last note on your arithmetics: at 2% return per year, your originally $25k become $30.5k after 10 years. If you apply a more realistic 5% appreciation per year, you get $40722k.

    Notice that the difference is roughly $59k in 10 years from now. In today’s dollars, applying inflation of 2% per year (conservative), the difference is $48400.

    Leaving aside that, barred the past 10 years, 5% appreciation is quite high for Vancouver, and forgetting that rents are probably not sufficient to cover everything with a 25% down (you forgot transaction costs, realtor’s costs, condo fees, any adjustments or expenses like fridges, balconies and the list goes on), you still have $55k of debt to the bank in 10 years from now, which in today’s dollars is $45100.
    So, if you look at the net asset position under the two scenarios:

    1) rent and invest your $25k (conservatively may I say) for the next 10 years: wealth amount in today’s dollars is $ 40722 (after discounting inflation).

    2) buy now and stay in the market for 10 years: net wealth position in today’s dollars is

    $40722+$48400-$45100=$44022

    So, the difference between RE and a conservative cash investment (GIC) is just $3000 under your assumptions.

    If something goes wrong with RE (oh, the unthinkable!!!) then you can experience a substantial loss. Plug the same number with a 4% nominal growth or with higher interest rates (both for savers and borrowers!) and see what you get….you do the math!

  31. robchipman

    Domus:

    Baker said that the stock market doesn’t always go up long term. You said the stock market dominates real estate long term. The two positions seem opposed. Regardless of what I think about the “facts”, I’m surprised that you cut Baker so much slack. He simply struck me as unprepared and intellectually lazy. The main points he made were neither new nor much disputed. It was the additional fluff that, imho, hurt his credibility.

    Again, Ben Jones (not sure if you’d call him a bull), made more sense to me in much less time.

    Expressing disbelief in a 40% drop in 12 months is fine. Saying housing can hurt you because you could see a 5% drop after pointing out the increases we’ve seen is simply foolish. And if even larger drops are in the offing, but will take longer, what kind of time line are we looking at for price depression? At 2% per year (nominal terms, I know) it would take 26 years to see a 40% drop. At 4% it would take 13 years. Baker sees more than 40%, according to you. That’s quite the lengthy downturn.

    On the math, I pencilled in inflation at 2% – I’m not sure what you mean when you use that figure for “return”.

    5% over year is a little less than typical for Greater Vancouver, figured from 1980 to present. It varies from between property types and locations, but the REBGV tracks SFH, attached and apartments in all the sub-areas, and ranks them in 4 quality categories. You can do the math to get the nominal appreciation quite easily. Again, currently its above the long term number (as we would expect), but it has been over 5% per year as long as I’ve been tracking it.

    When I say a property cash flows neutral at 25% down I haven’t forgotten any costs. I manage a lot of property. When we crunch the numbers we include all costs. In other words, yes, the example uses simple, round numbers, but when I say cash flow neutral at 25% down I’m including all the costs you say I’ve forgotten. Taxes, maintenance, management and transaction costs are figured in.

    25% down today with a 5% annual return means 20% return per year, nominal. Buy for $100,000, sell for $105,000, pay off $75k mortgage, and you have $30,000. That’s $5,000 on $25,000 in one year. That’s 20%.

    Over 10 years its 20% per year, compounded. $100,000 today, $155,000 in 10 years. OSB is $55,000.

    $155,000 – $55,000 = $100,000.

    $100,000 – original downpayment = $75,000.

    75/25=300%

    .

    Not only is the math simple, there are hundreds of demonstrable examples in my office alone, not including the last 6 years, when those returns hit much (much,much) more than 300%, and did it over a shorter term.

    Its not unthinkable that something can go wrong. Things go wrong all the time, and you should factor in that real estate value will go up and down, and that things will, in fact, go wrong. I don’t think I’ve ever denied that. I think its a common, but unfounded accusation (like “You forgot to factor in the real costs…”)

    You can leverage real estate more safely than just about any other investment. You can lock in mortgage costs for 10 years at a time. You can control your exposure by changing the amount you put down (most of my clients are satisfied with less than 20% per year, and opt instead for less leverage; 50% leverage is common, despite received wisdom from the railbirds that it is a bad deal). The best thing? You don’t need to sell, ever, if you bought well. You just remortgage and buy more. The next thing you know you’re selling so that you can pay off your kids’mortgages, and reflecting in the fact that your tenants paid for your first house two or three times.

  32. Domus

    “Baker said that the stock market doesn’t always go up long term. You said the stock market dominates real estate long term. ”

    Yes, the two statements are consistent with each other. In fact, they are recognized most people barred you and, maybe, the realtors’ association.

    I am sure many people did a killing with housing in the past 5 years. I never questioned that.
    You still don’t tell me where my numbers are wrong. I simply applied a GIC rate on cash and left all your assumptions unchanged.

  33. robchipman

    Domus:

    Ok, let me see if I get this: the stock market beats real estate long term. The stock market doesn`t always go up long term. I see a conflict there, and its based on what you call a long term. I don`t buy that you believe that stocks (as a group)don`t always go up long term. Make the term long enough and they pretty much have to.

    First things first. Everyone realizes that equities return more than real estate, long term, on the surface. Put $100 in an index and after a long term you`ll have more money than if you put $100 in real estate, if you do the computation on face values. There is no argument there. You`re pretending there is one for some reason.

    When you factor in how people buy real estate versus how they buy stocks, the numbers change. This is easy to demonstrate. Your only counter argument is that stocks can also be leveraged. That`s not a convincing argument, in my opinion. Its much more common, much safer, and much easier to leverage real estate.

    In terms of the math you did actually change a lot of assumptions. Go re-read your post.

    You said 5% per year was not common in Vancouver aside from the last few years. In fact 5%+ is common, long term in Vancouver, and over the last few years we`ve crested 20% a few times.

    Frankly, I didn`t pay much attention to your numbers once you started counting costs that had already been counted. Its easy to reduce the return on an investment when you count costs twice.

    The fact remains: 5% leveraged at 25% down means 4x the return. That`s 20% per year, compounded. Factoring in inflation is a valid issue. However, real estate, through leverage, is a recognized inflation hedge.

  34. Domus

    Rob,

    I am not going to give you more links or readings. Do your homework: go to a reputable source (NBER for the US,StasCan for Canada,Office for National Statistics in the UK) and consider the period 1900-2000. Compute the average house price appreciation over that period (like Shiller does, another reputable source). Then do the same with the Dow Jones Index of major industrial US stocks (or the TSX, or the FTSE in the UK).

    The difference is stark: stock market returns dominate RE returns. I know you will start mudding the waters again, talking about leverage and who knows what. But all I am asking of you is to do your simple homework and give an answer to the following hypothetical question: if you could choose to invest $100 in 1900, would have been better to buy RE or an index of stocks?

    “Its much more common, much safer, and much easier to leverage real estate.”

    May I ask you: why???

    If you leverage stocks and lose you can go just as bankrupt as with RE. Repossessions are not a feature of imagination and a very harsh reality in the US just about now.

    “In terms of the math you did actually change a lot of assumptions. Go re-read your post.”

    Rob, you should read my posts a bit more carefully. I did not change a iota of the assumptions on RE that you made. Not a single thing.

    The only assumption I changed was on the returns to a risk-free investment of 25k. Interest rate of 2% before inflation is ludicruous: ING gives more than 3.5% and there are GIC that give 5%. This is the only assumption I changed. What are you referring to? Read my post.

    “Frankly, I didn`t pay much attention to your numbers once you started counting costs that had already been counted.”

    What?!? Which costs did I count twice? I left your assumptions on RE intact. I did criticize them as unreasonable (and I stand by that) but I did not change them at all. My post takes your assumptions on RE for granted. And even then it shows that RE is not such a great deal even compared to a simple GIC right now…..4 years ago was a completely different story. Readers of the blog should read the post carefully for themselves….

  35. robchipman

    Domus:

    On the surface, $100 dollars in stocks will return more than $100 dollars invested in real estate, based on face values. I’ve agreed with on that, what, four times now? I’m glad you’re going to just give up and accept that we don’t disagree and that you don’t have to keep explaining it to me.

    Leverage is how real estate is purchased. You can’t get around it. You can call it muddying up the waters, but the fact remains, real estate is purchased with leverage, and the whole market factors that in. You can ignore it if you like; the market doesn’t.

    Leveraging real estate is safer and easier than leveraging stocks because you can lock in rates long term, borrow an amount appropriate for the cash flow, and shop a competitive market for the funds. Re-payment terms are very flexible. You don’t have to re-qualify to re-mortgage. The purchase itself is the security and it is quite easy to qualify.

    You’re reading my first post incorrectly. I used 2% as an inflation rate, not a return on a competing investment. The costs you counted twice were maintenance and transaction costs. And to quote you…”The only assumption I changed…”

    Get a GIC for $25,000. Get 5% on it for 10 years, compounded. The $25,000 is now $38,800. Subtract your original $25,000. You’ve got $13,800. That’s 55%.
    Do your math on inflation to get your real return.

    Buy the rental that cash flows at 25% down. In ten years you’ve got $75,000 instead of $13,800. That’s based on a long term hold at just under historical appreciation rates. Do it this year, so far, and you’d have a 36% return, just counting from January. If you did it 4 years ago you’d have made 190-200%.

    Buy real estate wisely, according to specific metrics, and hold it long term, and you’ll do very well. You can also make other investments. I don’t really want to argue that one is better than the other. Predict the future, by all means, but consider alternate outcomes and prepare for them. If you can take care of the downsides that upsides will take care of themselves.

  36. Domus

    “Buy real estate wisely, according to specific metrics, and hold it long term, and you’ll do very well. ”

    I agree with that.I don’t agree now is the right time.
    I also don’t agree you can make claims about RE being better than stock investments.

    If I was in 2002 I would probably invest in RE again. Not now, sorry. The numbers just don’t make sense to me.

  37. robchipman

    Buying wisely isn’t about timing. Its about structure, metrics and potential. If you could buy a good cash flow positive investment today, with 25% down, would you walk away, betting on a market collapse, or would you grab the long term hold? When you say Ï’d have bought in 2002, but not now becasue the numbers don’t make sense”, what numbers do you mean?

    I haven’t made any claims that RE is better than stocks. I’ve expressly said I don’t want to make comparisons.

  38. jesse

    One thing about RE investment is that you need contingency funds, for when there are tenant problems, repairs, etc. As long as this is budgeted for, you have no problem but it will reduce the return because this allowance needs to be available quickly (i.e. you need $X in a short term CD, savings account or whatever that is not available for other things).

    Also I’m not sure how scalable RE investment is. Eventually you need to hire people to do the management for you or it turns into a full-time job. What this means is at a certain point do you re-mortgage some equity and buy a tenth property or do you find something else like some well-managed company paying a dividend. There may be times when the availability of good property managers is poor so the returns could be eroded if you’re stuck with a sucky manager.

    A third point is that mortage rates are still quite good historically. You are implicitly taking a risk that rates will not rise by another 1-2%. IF that happens that +$90 is suddenly negative something. As long as you are enough CF+ to handle the rate rise or have an alternate source of income, you will be OK, otherwise you are taking a risk. With stocks you just hold with virtually no thought and there is no worry of future outlays.

  39. Domus

    “Buying wisely isn’t about timing. Its about structure, metrics and potential. ”

    Exactly my argument: you must be seeing things I don’t see: at the moment structure, metrics and potential are just not there.

  40. robchipman

    Domus:

    I’ll update you on that, hopefully, tomorrow. You’re not correct, mind you. Good metrics exist, they’re just hard to find.

    Jesse:

    I’d recommend getting a professional PM as soon as possible. Most of my clients start with one property and build from there. They don’t wait until self management is too much work. It costs, but its a tax write off and its worth it. I count management in every analysis I do.

  41. Domus

    Rob,

    I know that deep down many people reading your blog have an interest in buying/investing in RE. I don’t blame you for marketing RE full throttle.

    But you’ ve got to come up with some pretty convinving metrics/potential growth to convince me there is something worth buying in this market.

    To me it looks like a big pit ready to swallow yor cash. Mind you, it was different just a few years back.

  42. robchipman

    Domus, I know what the real estate market looks like to you.

    I have to ask: what do you call convincing metrics? And if I find a property that has them, would you buy it?

    And, I think, most important, if the metrics are acceptable to other reasonable people, and they achieve financial success by abiding by a disciplined approach to real estate, but you remain unconvinced, is there a problem with the metrics and the disciplined approach?

    In terms of growth, do you think its unreasonable to assume we’ll see 5% annual growth over the next 25 years? (I realize its an assumption, but you have to start somewhere).

    Do you really think this is full throttle real estate marketing? Have you looked at what they’re doing with marketing lately? This is, in fact, an extremely passive marketing program at best.

    I’m curious: did you buy a few years back? Have you sold recently? (Full disclosure/fair play – I bought and recommended buying in the past, including the time you’re talking about. I’m not selling now).

  43. Domus

    Rob,

    metrics for me have a lot to do with affordability, as often captured by price/rental ratio.

    Low price/rental are great, high price/rental are bad. (sounds like a children game….)

    Low price/rental needs low downpayment to be profitable for investment, high/price rental needs high downpayment (which in turn reduces your beloved leveraging….).

    Finally, to use a finance example, high price/rental is equivalent to high price/earning for stocks: usually a bad sign for investors, unless you are dealing with some revolutionary invention which is going to change the world.

    These are pretty simple metrics and if you can tell me that there is abundant supply of properties in Van West side satisfying these criteria, well I’d be happy to give you a ring. I am not an RE expert, but I can count: I don’t see any stuff around with these characteristics.

    Regarding my bio, I am not a rock-star and I will keep it that way. Let’s just say I have no immediate implication with RE and I am not going to starve either way of the market.

    Honor of the arms to you: you would have made a very good tort lawyer….you are good at mudding waters, although you don’t like the expression.

  44. robchipman

    Domus:

    Thanks for the backhanded compliment. In regard to metrics, however, I think you’re both changing the goal posts and letting your Westside prejudice show 🙂

    Its a long established fact that people pay a premium for Westside property. Non-real estate people will argue that this is irrational and shouldn’t happen, but it always has and always will. The result is that your returns, dollar for dollar, on Westside property never compares to property in, for example, Maple Ridge. That holds true market up, market down. Don’t hold your breath waiting for a nice Westside property to cash flow at 25% down.

    Your approach to metrics in terms of price/rental is a good start, but you have to go further. Equating it with price/earnings ratio is really irrelevant. Yes, there are parallels, but who cares? The idea is self-explanatory from the start. Further comparisons with the stock market tends to screw the analysis. You’re better to wait for the final returns and then compare them with alternate investments than to compare the two side by side at each stage.

    Last, I think that the water appears muddy because its a confusing world, not because I’m kicking up mud. My position is pretty consistent, and the areas where we disagree are obvious: I don’t have a lot of faith in my ability to predict the future (you do); I don’t believe in market timing (you do); I like zoning because of the process, whether it restricts or promotes density (you don’t like the process if the results aren’t what you want).

    Otherwise, I don’t think we disagree all that much.

  45. Domus

    “My position is pretty consistent, and the areas where we disagree are obvious: I don’t have a lot of faith in my ability to predict the future (you do); I don’t believe in market timing (you do); I like zoning because of the process, whether it restricts or promotes density (you don’t like the process if the results aren’t what you want).”

    I have no ability in predicting the future: I have some faith in markets to eventually revert to sanity. That’s all.

    Market timing is not my thing: normally I would suggest young kids to overpay a bit if necessary. in this acse, it is a matter of financial disaster for them, rather than market timing., that’s why I am vocal.

    I don’t have any preferences in urban regulation but one: I think density is preferable to sprawl. i think people live better lives in compact neighborhoods with shops in them. I think that social interaction and dense neighborhoods are good for individuals and society. i think Vancouver has managed to buck the north-american trend towards sprawling and should treasure its difference. All these reasons support my view that Kits should be rezoned and developed. By sticking to your point, you simply support the alternative view.

  46. robchipman

    Domus:

    You’re killing me! 🙂

    I know you prefer density over sprawl. That’s clear, and has been from the start. I understand that this leads you to believe that Kits needs to be re-zoned and densified (which is happening now, as we both know, but apparently not fast enough for you).

    That’s enough preference for results. You can’t minimize it by saying “I have but one preference”. The one preference is a huge one. And the result is that you don’t like the current zoning process because it doesn’t provide the results you want.

    I don’t oppose rezoning Kits and densifying it. I simply recognize that some other people do oppose it, as you do. I go further and recognize thatthey have the right to disagree with you, and that current zoning policy provides for the resolution of the conflicting views.

    I’ve never said I prefer sprawl to densification. You seem to assume that because I disagree with you one one thing I must disagree with you on all things. I said I prefer individual freedom, even if it results in sprawl, to forced densification at your command. My point is that when one segment of society dictates how another lives a degree of freedom is lost. To the extent that I support individual freedom I accept alternate outcomes, whether they be sprawl, live/work spaces, multi-family high-rises, or in-fill extending to garage conversions.

    I think you have to accept that supporting densification because you think it provides better lives and more social interaction is one thing, but forbidding sprawl because you don’t like it is another. I recently spoke to someone who was mugged in their East Van neighbourhood, within walking distance of my office. 4 stitches inside and 16 outside to close the cut. He was knocked out and woke up in a pool of blood. His companion was still out cold. He’s a fan of sprawl and would like to move to Maple Ridge to raise his kids. Surprise, surprise. He’s not such a big fan of some of the social interaction that higher density brings. Is he entitled to that opinion?

    I think I also recognize the extent of sprawl we have here. I’ve lived here over 40 years. I’ve seen the changes, and I think I probably get out to the nooks and crannies of the Lower Mainland more than you. Saying we’ve avoided sprawl simply rings false to me.

  47. Domus

    “I go further and recognize thatthey have the right to disagree with you, and that current zoning policy provides for the resolution of the conflicting views.”

    Rob, did I ever say I feel like Stalin and I am going to eliminate people who oppose densification? I actually think I might for the first time be a minority as more and more people prefer “desperate housewives” dwellings…..
    If I am minority, I will certainly lose. But I still have a right to say what I prefer and why.

    “I’ve never said I prefer sprawl to densification.”

    You instead seem to be an “all weather” gear: if the wind goes one way, you will blow the same way….nothing wrong in stating what your preference is…..it is obvious that your preference is not necessarily what people should do, at least obvious to me.

    “Surprise, surprise. He’s not such a big fan of some of the social interaction that higher density brings. Is he entitled to that opinion?”

    One more example that you are a bit of a flag, you go with the wind….
    Recently we had a conversation about the downtown eastside and crime. Maybe your friend was mugged by a middle class working father looking for a house downpayment….more likely it was something else, maybe drug related. Last time I checked you told me I was some kind of weirdo for even suggesting that east side should be redeveloped to displace the concentration of junkies….rezoning means also making tough choices to allow people to move to a place. But strangely you did not seem to agree last time we talked about this.

    In any case, your example is pretty much irrelevant: go to LA and see how much crime you can get in sprawling areas, while waiting at traffic lights. Come on, be serious……

    “Saying we’ve avoided sprawl simply rings false to me.”

    Rob, you keep on banging about what the state of things is. Keep in mind that, if some people had not made some tough choices in the past, the state of things could be much, much worse….Phoenix may be an estate agents paradise, not necessarily a residents’ paradise…

  48. robchipman

    Domus:

    You’ve got the right to express any opinion you want, and I don’t think I’ve equated you with Stalin. However you don’t make it much of a secret that you feel your opinion of development is the one that should be followed. When faced with the simple observation that while many people share your views, many obviously do not, you seem to indicate that those who do not share your views should conform.

    When I say that I like stable zoning laws because they provide a framework for all stakeholders to accomplish as many of their goals as possible, you conclude that I oppose densification.

    I have a clear preference, and I’ve stated it: individual choice based on enlightened self interest is preferable to direction from above.

    When you suggested that the DTES wasn’t a suitable place for junkies, but was a suitable place for conversions I pointed out that many people in this city don’t agree with you, and in fact explicity opposed your position. I suggested that your opponents couldn’t simply be ignored. I suggested that zoning laws were a method for reconciling your views and those of your opponents. I didn’t suggest that you were a wierdo for wanting to clean up the DTES. I will say you’re naive to think you can ignore your opponents. After all, they’ll illegally occupy vacant buildings and politicians offices; they’re not going away because you think they’re stupid.

    I don’t think we’re doing anyone any favours maintaining the DTES, but the idea that redevelopment of depressed neighbourhoods is an effective way of displacing undesirable populations is really just a case of moving the problem. I find it amusing that you seem to think that converting funky DTES brick buildings will result in affordable housing for hip urbanites. Have you missed the price points on that whole hip urbanite pre-sale thing we’ve been witnessing?

    In terms of re-zoning being a tough choice, I think I’ve been pretty clear: I’m in favour of the zoning process, whatever the outcome. Zoning changes on a regular basis. In 1980 there were very few secondary suites allowed in the Lower Mainland. By the ’90s Vancouver had accepted that they were here and changed the zoning to allow and regulate them. In the early ’90s Yaletown was zoned light industrial. Now look at it. Areas around Skytrain stations have been re-zoned. Industrial areas have been re-zoned multi-family. Nobody controls land use for 100 years through zoning. That’s a canard.

    I think you might also be unaware that re-zoning is generally permitted long before its desired. You can’t push string. You can zone land SFH, but designate it multi-family. It still doesn’t densify until a developer feels he can make a buck doing it.

    You are showing yourr true colours when you dismiss the experience of a serious assault as an irrelevant criticism of density by command. Remember that I support density for those who want it. But I also support sprawl (I love the Westside yuppie condecension that drips from that word) for those who want it. And so I ask again: if an individual decides he’ll be safer living in Maple Ridge than in a more dense area, do you think he’s entitled to hold and act on that opinion?

    You are right that I refuse to ignore what is. I am clearly guilty of recognizing reality. Its a failing, I know. You think that we made a decision about a freeway through the Westside in the 70s that somehow avoided sprawl. Yet you complain about the sprawl and cookie cutter houses we have. Can I quote you as evidence that we have sprawl?

    Phoenix probably is a hell. People probably hate living there. Do you know whether its grown much in the past 20 years? Probably not. (Oh, sorry, that’s just me observing reality again :-))

    Last question: who do you think the people are who made the tough choices in the past? Were they far-seeing philospher kings who knew what was best for us? Or elected local politicians in various municipal governments?

  49. Domus

    “But I also support sprawl (I love the Westside yuppie condecension that drips from that word) ”

    Good. Some preferences at last….I love that you so aptly categorize me as a yuppie…..will put it down next time I am in a focus group!

    ” Phoenix probably is a hell. People probably hate living there. Do you know whether its grown much in the past 20 years? Probably not. (Oh, sorry, that’s just me observing reality again :-))”

    Rob, have you ever been to Mexico city? People still live ther…..it must be a nicely planned urban environment. What argument is that….??

    “And so I ask again: if an individual decides he’ll be safer living in Maple Ridge than in a more dense area, do you think he’s entitled to hold and act on that opinion?”

    Rob, I think if he loves to live there he should do so. Also, he should not expect the city to build a large motorway to save commuting time. Everyone should be free, but it should be well understood that the cost of choice falls on the chooser rather than society. Externality, a word you will not learn ever….

  50. robchipman

    Domus:
    Pay attention, buddy! 🙂 Its not “some preferences at last…” simply because you finally understand what’s being said. I expressed the same preference day 1.
    The city doesn’t pay for the huge motorway to Maple Ridge. All taxpayers do. Your problem is that you think there is a cost that isn’t being recovered that you’re paying for. You might be right. Unfortunately (and this is the nature of most externalities) the reality isn’t as simple as the theory. Externalities fall into two categories – those that can be recovered easily, without much dispute, and those that simply don’t lend themselves to double entry book-keeping. The externality looks clear to you – trust me, when you try to collect the bill you’ll probably find that the guy you want to pay either disagrees that he should pay or has his own externality bill for you.
    Try to remember – people can understand you and still disagree with you.

  51. Domus

    Good, so we agree: we might be facing a situation in which the sprawl-loving guy expects to be subsidised by society for his choice to live in Maple Ridge?

    If people let it pass, like in the US, so be it……..

  52. robchipman

    Domus, I think you’re hearing what you want to hear because it makes you sound right.

    I don’t think we can actually collect on most externalities, largely because we won’t reach agreement on the price. I don’t think that we’ll develop a new system where we trade externality costs between urbanites and suburbanites. I think the current system handles externalities as well as they can be handled. The suburbanite, under the current system, pays a levy to Translink, for example, despite not having realistic transit options. The urbanite riding the Skytrain from East Van to downtown benefits from that. (That’s only one example). The suburbanite will also argue that he pays way more gas tax than is required for the real costs of road travel. And since you can’t put a monetary cost on air pollution…

    I understand that you think divergence from your vision is bad, and so must be equated to the States (the old “American = bad” argument). I’d be surprised to learn that you’ve travelled extensively in the States, because it changes dramatically from region to region.

    I’m also surprised to hear you finally say that if the people desire something, so be it. That’s my position, clearly, but up until now you seem to have been arguing that people need, at a minimum, financial coercion to conform to the vision that tough decision makers arrive at.

    Anyway, I don’t think you’ve demonstrated that we agree on these main points: ability to predict the future (you think you can do it, I don’t think I can do it); market timing (you think you can do it and that its a good approach, I don’t think I can do it and I think its a bad approach); zoning, whether it restricts or promotes density (you don’t like the process if the results aren’t what you want, I like the process).

  53. Domus

    Darling Rob,

    for the n-th time (and I know it won’t be the last…..sigh):

    – I never claimed to be able to foresee the future. I simply expect markets to go back to long-term equilibrium.

    – Don’t really know when market will go back: I know they will and I can risk to say that 3 years from now things might look very different. More than that, it would be pure guessing (which I do happily all the time and I clearly label as “guessing”);

    – What you call financial coercion, I call incentives. I would not dream of having a dictator doing that and I happily accept people making their choices. You say that there is no way to charge people for the cost of their choices, I say that where there is a will there is a way. Of course, the will must be that of the majority and reflected faithfully in local politicians’ actions. Not always the case, unfortunately..

    – I like zoning as a tool to promote balanced growth (rather than a special interests’ tool). Of course, I have preferences for certain types of zoning, as you probably do yourself. I am a honest person and therefore express my preferences. You should not be embarassed to do the same and engage in an argument about the merits of alternative zoning types.

    All in all, you are making the case for X today and for Y the day after. Or at least, so it seems to me…..

    PS And yes, I did spend some time south of the border….not that I miss it much…..

  54. robchipman

    When you need an incentive, and there is a will, there is a way. Mind you, if you had the will to begin with, why do you need the incentive? Because its not an incentive. And there isn’t a will. There is Peter trying to make Paul do what Peter wants.
    I actually said there is a way to make people pay for their choices, and while its not perfect, its currently in place and functioning.
    Although you say you can’t predict the future, you say buying in Vancouver now is financial suicide. You’ve made the prediction. Enough said.
    You say you like the zoning process when it promotes balanced growth, but not when it promotes special interests. That’s the same as saying you like the results, not the process.
    I said I like the process, and as a result I accept the results. That’s a preference. You want me to express a preference in your terms. I see a different issue and see your terms as unworkable.
    Accepting all zoning results and not having preferences for certain types of zoning isn’t flip flopping. Its accepting the will of the people as expressed through local government and zoning bylaws. Its like saying I like supermarkets and all they supply, but I’m not interested in promoting the virtues of ice cream over liver. (BTW, zoning isn’t the simple will of the majority. Our system is a little more inclusive)
    Terms like “balanced growth” are useless. I doubt you could get a majority to agree on balance anymore than you could get them to agree on whether WalMart is good or not. Its a label you apply to yourself, like a white hat. Its like calling yourself honest and calling me embarrased and saying you don’t want to control things. Your statement really says “I’m honest, you’re not, I’ll provide the alternatives, you can make and defend the choice”.
    I’ve never said you were dishonest, btw, just as I never called you Stalinist. I think you believe what you say, but I just don’t think you’ve thought those things through. I do think you like control and organization more than the next guy.
    How do you confuse any of that with being embarrased to take a position?

  55. Domus

    “Mind you, if you had the will to begin with, why do you need the incentive?”

    Clearly there are diverging wills: which one is the majority’s? That’s the question, my realtor friend…..

    “I actually said there is a way to make people pay for their choices, and while its not perfect, its currently in place and functioning.”

    ….oh yes, I think we live in the best possible world….

    “Although you say you can’t predict the future, you say buying in Vancouver now is financial suicide.”

    As usual, you are an artist at turning tables: I wish i could tell the future. I can’t. I can tell you, though, this is market is going to turn upside down. It’s basic economic theory: it is not precise on timing, it is rather accurate on long-term facts…..

    “I said I like the process, and as a result I accept the results. ”

    So, you would accept if they rezoned the lower mainland to light industrial? You love the process after all……
    You are truly wonderful sometime, I really wonder where you get this ideas…..

    “Accepting all zoning results and not having preferences for certain types of zoning isn’t flip flopping. ”

    See my comment above……

    “Your statement really says “I’m honest, you’re not, I’ll provide the alternatives, you can make and defend the choice”

    You said it…..Truly, I don;t think you are a dishonest man. I have the impression you have some spine and deserve credit. But you cannot come and tell me you are the white knight of public choice and that whatever is chosen is, by the simple fact it has been chosen through democratic process, the best possible outcome.
    Of course you will accept it, as I will do. But telling me that you love it because you love the process….
    tell me what you really think man!

  56. robchipman

    Domus:

    “Clearly there are diverging wills: which one is the majority’s? That’s the question,…”

    No, Domus, its not. Enlightened self interest recognizes that majority rule can equal tyranny of the majority. That doesn’t work. The minorities (plural) must have a voice and must have a real chance to accomplish their goals. Of course, you must also anticipate the absence of an absolute majority.

    “So, you would accept if they rezoned the lower mainland to light industrial? You love the process after all……”

    First, I don’t know who “they” are. If zoning changed it would be “we” who change it, not “they”, unless I wasn’t part of the “we”, in which case I don’t deserve a say. I like the process because I understand how it works. There is no danger of your proposed result. Its a ridiculous outcome.

    “….oh yes, I think we live in the best possible world….”

    There’s room for improvement, I’m sure. I also recognize the advantages of the system we have. You seem to think your ideas are good because they’re yours. There are obviously people who disagree with you (DERA was in the news today opposing moving people out of the DTES, for example). You actually suggest using development as a way to displace them – your words, not mine. Do you think that kind of approach would be viewed as an incentive by your opponents? Do you think your system would be more harmonious than the current one, or less?

    You seem to argue that more density will provide afffordable housing. You ignore the fact that most dense housing comes with luxury or at least semi-luxurious fittings. Affordability hasn’t been that much of an issue.

    I have faith that competing interests will not lead to extreme outcomes. I’ve seen that public pressure has an effect on many aspects of government, not just zoning. I’ve seen zoning change considerably. I find the changes to be good.

    I’m no white knight, but I don’t have a problem taking a stand, making a decision or making a choice. If the democratic process functions (that is, if its not corrupt or a tyranny of the majority), I’m happy with the outcome. I don’t let the perfect become the enemy of the good. I will, to a degree, settle for less if that’s the cost of getting something. If that means Langley changes zoning to allow towers in their downtown, I’m for it. If it means Langley introduces a building height bylaw in their downtown, I’m all for it. I trust my fellow man and I know that local politics will revolve around precisely those kind of issues. Change the name from Langley to North Van to Vancouver to Burnaby to Richmond to Surrey and I’ll be in the same place.

    I support the process because the alternative is to take away people’s right to choose or else embrace chaos. Faced with those two bad alternatives I choose the process. And I don’t accept the results because I have to in terms of being forced by some power and not being able to do anything about it; I accept them because I make a commitment to abide by our mutual decisions before the results are determined. I like the game whether I win or lose. Obviously I prefer to win, but not so much that I’ll rig the rules. Why do you find that hard to believe?

    In terms of basic economic theory being accurate on long term outcomes, is there only one outcome? When prices go up they must come down? And of course, the reverse? When prices go down they must come up? You can’t be that naive. This market will change. That is a constant. We don’t know when. It might continue to expand until the Olympics based on psychology alone – stranger things have happened. It might stagnate in an environment of stagflation. It might re-trench for a year and then bump up again. Or it may crash. We don’t know which way it will go because there are so many inputs and they are so different. When did you recognize that the market had to, inextricably, go down? How long ago was that? Why has something different happened, and how often have you changed your timeline?

    I’m glad you think I have some spine, because I’m doing my best to call you out. I want to know how you think your approach to development is going to actually succeed without coercement, given the self-evident oppostion. I am, however going to the Island tomorrow. Don’t confuse my silence with victory 🙂 !

  57. Domus

    Have a good trip.

    “Enlightened self interest recognizes that majority rule can equal tyranny of the majority.”

    Rob, is real estate succes getting to your head? You sound like Napoleon……but enlightened!

    “First, I don’t know who “they” are. If zoning changed it would be “we” who change it, not “they”, unless I wasn’t part of the “we”, in which case I don’t deserve a say.”

    Yes, there is a they. The decisions on zoning and development are made by people who are not, strictly speaking, elected by anyone. They take political input as much as they take other inputs.

    “You actually suggest using development as a way to displace them – your words, not mine. Do you think that kind of approach would be viewed as an incentive by your opponents? Do you think your system would be more harmonious than the current one, or less?”

    Harmonious? Are you sure you want to use that word? Have you been to the DTES lately? And you think that the right thing is to leave it that way because otherwise it would be not harmonious?

    “I like the game whether I win or lose.”

    Good. I will wait to see what happens when you start to lose then….we are not too far off.

    “In terms of basic economic theory being accurate on long term outcomes, is there only one outcome? When prices go up they must come down? And of course, the reverse? When prices go down they must come up?”

    If history is any guide, yes! There is always that possibility that it’s different this time……

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