Tuesday Numbers

Short numbers tonight.  A good bear weekend!  There were 306 new listings and 196 sales for a sell/list of 64.05%  There were 131 price changes.

 Inventory dropped to 11,842, and over 90s also fell, reaching 1,985, or 16.76%.

The 14 day rolling sell/list was 72.76%.  

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168 Comments

Filed under Daily Numbers

168 responses to “Tuesday Numbers

  1. Skeptic

    Inventory is basically where it was 7 weeks ago.

  2. Domus

    Inventory is where it usually is at the beginning of the month….in the doldrums because of expiries.

    Does it really take that much to understand that, was it not for end-of-month expiries, inventories could not possibly drop that much? Do the math: 306-196=110. Inventory should be rising. It dropped. Wait at least a week and you will see an explosion of stock on the market if the sell/list does not pick up substantially……

    Rob, how many of the price changes were decreases out of the total?

  3. passerby

    The average % of decreases since May was about 88%. Rob may have a different number though 🙂

  4. aetakeo

    The Shiller study over at Mohican’s suggests a number of things and is definitely worth a read. One caution to bears: the psychology of the American boom has gone positive again and Mohican’s post shows we do often track the States. Shiller is probably Papa Bear on housing right now, but he’s also actually watching the numbers; he’s examining how psychology works in the markets, and suggests there may be more (boom hysteria) to tap. My words, of course. Of course, with the collapse of sub-prime, I doubt it will be all that sustainable, but that’s just me.

  5. vanreal

    Domus why are you so fixated on price change decreases. It is only selling price that matters not listing price. Many people overprice their house to begin with and are forced to come down to market value. It means little.

  6. Concerto

    aetakeo – can you give us a link to that study/mohican location ? thanks

  7. ontheisle

    I recall Shiller in a video interview I saw last week on Bloomberg say real estate will be a dead investment for the next 5 years. More boom hysteria ? always possible but highly improbable with interest rates going up.

  8. schmuck

    Concerto,

    Here’s the link to mohican’s blog:
    http://langley-financial-planning.blogspot.com

  9. tqn

    Vanreal,
    It’s somewhat difficult to know the different between listed price and sold price. Can you give each a description so I regular can understand it. Thank a bunch!

  10. dingus

    “One caution to bears: the psychology of the American boom has gone positive again”

    Say wha? What do you base that on?

  11. aetakeo

    I don’t, dingus. Read Shiller’s paper linked at Mohican’s. He be smrter than I, and the whole paper is about tracking psychology. I’m not recreating the argument here because I’d break it – it’s a really good essay.
    Shiller does not suggest that this is sustainable. Only that (my words again) people’s biases get in the way. One such quote: “The uniqueness bias has its effect in the housing market when people imagine that the city they live in is unusually attractive, and increasingly so. They fail to understand that new such cities can be constructed in what are today cornfields or forests.” What Shiller is suggesting is only that people are re-establishing faith in the uniqueness bias in some markets, based on things like customer survey and new housing starts.

  12. schmuck

    dingus,

    I think the comment was intended to be facetious,
    here’s one that’s a little more direct:
    http://thehousingbubbleblog.com/?p=3050

  13. /dev/null

    vanreal – isn’t it the case that if the price was reduced then there likely wasn’t a bidding war for the sale?

    My understanding is that for the last few years sellers would overprice their house (as you say) and then the feeding frenzy of buyers would bid it up from there. That’s why market value went up so quickly. So in my view the reductions do in fact mean something….

  14. tqn

    “My understanding is that for the last few years sellers would overprice their house (as you say) and then the feeding frenzy of buyers would bid it up from there.”

    i thought it was the other way around that the seller underprices his place and the buyers bid up?

  15. tqn

    and overpriced houses dont sell in any market!

  16. Joshua

    “and overpriced houses dont sell in any market!”

    … you’re not from around these parts, are ya? 😉

  17. tqn

    no, and i am still reading “Real Estate for Dummies”

  18. Concerto

    I think I need to be led by the hand here – I can’t find the d@mn thing. Can someone please post a link straight to the essay mentioned above ?

  19. vanreal

    tqn, A listing price is the price that the seller is asking for his house while the selling price is what the buyer actually paid for the house.

    dev null, usually in a bidding war, houses are underpriced and then the competing buyers drive the price up. there is a huge difference between a hot hot market where bidding wars can happen and a normal seller’s market. I believe we are still in a seller’s market but not in a wildly hot market, so no I don’t think that listing prices mean anything.

  20. schmuck

    Listing prices don’t mean anything???

    By the time selling prices are revealed and begin to show up in official stats, it’s quite possible that the market could already have turned. Until that time, listing prices are one of the few indications of the present market mood.

    I guess some dreamers stuck in denial will be telling us next that growing inventory does’nt mean anything.

  21. vanreal

    Schmuck, Explain to me how you think decreases in listing prices explain a changing market. As I said before many people try to get the most they can and therefore overprice their house to begin with so when they drop the price, it is still at current market value. Even though agents try to talk realism to some sellers it just doesn’t work and they have to try the high price out for themselves. A decline in price does not mean a tanking market.

  22. vanreal

    I think your list/sell ratio will show a changing market long before listing prices will. In fact I think listing prices will be the last things to change as sellers desperately try to get top market value for their property.

  23. crasher

    I think this whole listing price thing that vanreal is refusing to let go, all started with an observation that price cuts are on the increase.

    It would take a lot more than vanreal’s logic to convince me that price cuts have the same influence on market trend as price increases.

    So, come on vanreal, you can have the last shot, and hopefully that will be the end of this nonsense.

  24. ontheisle

    Victoria has had price reductions the past month in many places,guess the smart sellers over here know whats coming while the dummies in the big town get greedy and get burnt.
    Oh yeah, just read BMO is calling for 2 interest rate hikes this summer alone ! smoke that fatty LOL

  25. vanreal

    crasher, show me where price cuts are on an increase. compared to what?

  26. tqn

    two interest rate hikes are already factored into the market; nothing’s new about that.

  27. tqn

    “June residential sales second highest on record
    Vancouver, B.C.
    July 3, 2007

    The Real Estate Board of Greater Vancouver (REBGV) reports that total residential sales reached 4,244 units in June 2007, an increase of 7.4 per cent compared to 3,951 sales in June 2006.

    This figure represents the second highest number of sales during the month of June in the Board’s history. The highest number of sales for that month was recorded in June 2005, when 4,333 sales were reported.
    The total number of new listings reached 5,533 units, an increase of 1.3 per cent when compared to the 5,460 new units listed in June 2006. Total active inventory increased by 17.7 per cent to 11,811 units when compared to the 10,033 units active in June 2006.”

    Run for the door! the sky is falling!

  28. concerto: here’s the schiller report pdf
    Its hefty at some 29 pages..

  29. Meanwhile in Vancouver it’ll cost you a nice round $715,715 to buy the benchmark house.

  30. News Flash

    “I recall Shiller in a video interview I saw last week on Bloomberg say real estate will be a dead investment for the next 5 years.”

    A “dead investment” hardly sounds like a crash. So all we are going to see is the 2% or 3% things have dropped in the US?

  31. News Flash

    “The uniqueness bias has its effect in the housing market when people imagine that the city they live in is unusually attractive, and increasingly so. They fail to understand that new such cities can be constructed in what are today cornfields or forests.”

    Do you think he is talking about Vancouver? Can someone point me to the cornfields surrounded by ocean with mountains in the back drop?

  32. aetakeo

    That’s exactly right, News Flash. Good job. Vancouver is unique, right?

  33. Priced Out

    So is this a good time to buy condos in Sochi? Before the rush.

  34. ontheisle

    “two interest rate hikes are already factored into the market; nothing’s new about that.”

    Not two within the 2 summer months,it was supposed to be 2 before the end of the year “maybe”, expect to see a third before the year is out.

  35. Deedub

    Vancouver is unique, right?

    Of course it is!

    Just like everywhere else.

  36. vanreal

    When will you bears realize that there won’t be the 20 to 30 per cent drop you are hoping for. It ain’t gonna happen folks. For all the hype about the US market tanking, it has only dropped 2 to 3 %.

  37. Mark

    If we look at overseas markets (e.g. Australia) where there were real declines, it was not symmetrical. Distinctive properties (views, by the sea, etc) and higher end properties where the income of the buyers was such that the cost of ownership was a lower %income, continued increasing, albeit at a rate of around 5-10%pa.

    In New Zealand, affordability is among the worst in the world, floating mortgage rates are around 10.2%, the NZ$ is at an all time high, approx 40% of GDP is via exports, there is a huge current account deficit … and house prices just keep increasing.

    Furthermore, in a sense Vancouver is unique – I’ve lived in many cities and an ocean/mountain setting is unusual (unlike cornfields). It’s reasonable to assume that people will pay a premium.

    The sense of those from downunder is consistent that in terms of value for money, Vancouver is far better than Auckland or Sydney.

    I calculated the cost of renting vs buying. My breakeven point is 2-4% pa appreciation, apart from the emotional side of owning my own nest 🙂

    Yes, the housing market will slow, but looking at overseas precedent, I don’t see the higher value properties collapsing in price, just slowing the velocity of capital appreciation. Lower value properties, those with long commutes and those without distinctive appeal could well decline, but this trend will happen slowly.

    In NZ, house price growth slowed steadily for 2 years, then suddenly took off again once the “bears” realised there was not going to be any collapse.

    The fact you need somewhere to live, and the fact that any capital appreciation is tax free serves to underpin the market.

    My opinion for what it’s worth, with an international twist 🙂

  38. tqn

    Vanreal,
    i heard it as high as 50%-70%. your number is low.

  39. Gadwin

    >vanreal wrote:
    >When will you bears realize that there won’t be
    >the 20 to 30 per cent drop you are hoping for. It
    >ain’t gonna happen folks. For all the hype about
    >the US market tanking, it has only dropped 2 to 3
    >%.

    That’s the average drop across the entire U.S. Vanreal, you should be comparing Vancouver to specific U.S. cities like Miami for a more realistic comparison. Many of us believe that Vancouver prices are inflated like Miami was so we will also drop like Miami “when the tide turns”

  40. Crabman

    Vanreal,

    If it doesn’t happen, it will be the first time we’ve had a big runup without a significant correction. Are you saying “it’s different this time”?

  41. Domus

    Mark,

    you might even be right. if you are, this might be really a different world: the end of housing cycles as we know it. The past has nothing to teach us in that case.

    The alternative story is this: house prices are sensitive to real interest rates and you should see how inflation is doing in NZ and Australia. If it is high, it means that monetary policy is not restrictive enough. House prices are high the world over at the oment (certainly in the English peaking world): one might argue that loose monetary policy has opened the flood-gates of house buying. Until that changes and the world is awash with cheap cash, house prices will float. As soon as credit markets revert to more normal conditions (like it is happening in the US) we might see a reversal in many places, including NZ and Australia. Last time I checked they were not running out of land down there: especially NZ has subdued immigration, nice weather and mountain views…..

  42. jesse

    “The fact you need somewhere to live, and the fact that any capital appreciation is tax free serves to underpin the market.”

    This is true but if the market knows this it prices in future appreciation into current prices. One can argue that the market is underestimating future risks and acting too optimisic. For example unemployment increasing to 7%, mortgage rates increasing to 9%, etc. seem remote possibilities now but if/when they happen they refute the optimistic projections and the market corrects.

    In OZ/NZ unemployment is very low historically. Ultimately if this ticks up it turns off the main valve of cash flow and can rip the market to shreds. There are always ways of supporting a large mortgage, even with some rate increases, as long as your primary income source is still there. Once that goes you don’t have too long…

  43. Domus

    “There are always ways of supporting a large mortgage, even with some rate increases, as long as your primary income source is still there.”

    Not quite: just see repossessions south of the border, they are at full employment, and thousands of people are defaulting.

  44. jesse

    “Not quite: just see repossessions south of the border, they are at full employment, and thousands of people are defaulting.”

    This is true, though I wonder how many people flip as a full-time profession 😉

  45. jesse

    Domus, I don’t know downunder market well. The loans prevalent in the US meant that people could take on a mortage greater than their cash flow. Defaults happen thusly. I don’t know how Wild West the lending is/was in other countries but if loans are reasonable compared to cash flow it takes that cash flow to dry up before the music stops.

  46. Domus

    “Defaults happen thusly. I don’t know how Wild West the lending is/was in other countries but if loans are reasonable compared to cash flow it takes that cash flow to dry up before the music stops.”

    Are you saying that credit markets outside the US take more account of cash flows? UK, Canada and Australia have more conservative lending?
    What is your argument exactly?

    I don’t know much about credit markets: however, I find it hard to believe that the above mentioned countries have substantially different lending criteria. If lenders overextend credit, current cash-flow can become insufficient when interest rates go up. That’s what is happening in the US with the so-called ARM time-bomb: people see their teaser rates updated to 2 percentage points above, which pushes their repayments up by 25% or more. They still have their jobs, but they cannot service debt long-term.

    Maybe Canada is different, maybe Vancouver is different. I just don’t know enough to say. I would guess not, but it is just a hunch.

  47. Johnnyrent

    Vanreal

    I don’t know what statistics you are looking at or what areas you have specifically studied however the 2-3% drop you’re citing is for the entire US. Indeed, even the NAR is predicting the first YOY national decline in housing prices since the depression.

    If you’re really interested in informing yourself, have a look at US stats for historically frothy (like ours) markets and areas within the counties in question. You’ll see drops that have already eclipsed 20% and still dropping. Other thus far more resilient markets are now beginning to drop.

    You state that a 20-30% ain’t going to happen in Vancouver however this ignores the fact that it has happened here four times since the mid-seventies. Bottom line, there is no precedent to support your prediction whereas there is plenty to support the converse.

  48. jesse

    “What is your argument exactly?”

    I have no knowledge of Australian/New Zealand mortgage market. I know a bit about the Canadian and US markets and my argument is that the types of subprime mortgage products offered in the US are different enough from the ones currently offered in Canada that we cannot infer that Canada will behave the same as what happened south of the line. I am pretty sure Canada will have similar problems with stated income and teaser loans in the coming years but I doubt it will be as bad as the US without job losses.

    This does not preclude the Canadian market from tanking worse than the US one because Canadian lenders may be quicker to tighten their standards than the US guys.

  49. Fozzie

    The Kübler-Ross model describes, in five discrete stages, the process by which people deal with grief and tragedy.

    The stages are:

    1. Denial : The initial stage: “It can’t be happening.”

    2. Anger : “How dare you do this to me?!” (either referring to God, oneself, or anybody perceived, rightly or wrongly, as “responsible”)

    3. Bargaining : “Just let me live to see my son graduate.”

    4. Depression : “I’m so sad, why bother with anything?”

    5. Acceptance : “I know that I will be in a better place.”

    Kübler-Ross originally applied these stages to any form of catastrophic personal loss (job, income, freedom). This also includes the death of a loved one and divorce. Kübler-Ross also claimed these steps do not necessarily come in order, nor are they all experienced by all patients, though she stated a person will always experience at least two.

    The above is an extract from the following site:

    http://en.wikipedia.org/wiki/K%C3%BCbler-Ross_model

    PLEASE NOTE: It is not my intention to compare the relatively mild frustration of not being able to afford a home in Vancouver with the true grief and devastation a person experiences with the loss of a loved one, and I sincerely hope the above reference is not seen as disrespectful.

    I have simply included this extract because I realized the model did a decent job of describing the emotional stages my wife and I have gone through over the past 2-3 years. On a positive note, we are beginning to work through the final stage and we feel a lot better. There are a lot of other very beautiful places in BC, Canada and the world, and I won’t need to mortgage myself into oblivion to live there. 🙂

  50. tqn

    Fozzie,
    You said it nicely! The issue here is that a few people have the trouble going through the last stage i.e acceptance.

  51. vanreal

    tqn, I think Fozzie was saying that you need to accept you won’t be able to afford a place in Vancouver and you agree with him. I don’t think you were being sarcastic but maybe I am wrong. Your previous response to me indicates that you think there will be a large drop of 70% in prices. So what do you believe?

  52. renting

    What fozzie described can cut both ways. If things start to unravel then the over mortgaged will go through exactly the same stages. Also with the loss of a loved one they ain’t coming back. With the Vancouver market being at such an extreme I’m pretty sure it will be more affordable some time in the future.

  53. e

    vanreal: bear in mind it is difficult to track the “price drops”, as averages can be misleading. at the same time, if people price the house too high, and drop the price (i.e. $1M drop to $900k), and it sells for $850k, then one may think its a 5.5% drop. therefore, transaction prices are more relevant (true market value).

    http://flippersintrouble.blogspot.com/

    has been mentioned over and over, but there are some examples showing past transaction prices i.e. first one:

    Sold on 2006-04-28 for $1,002,500
    Listed on 2006-09-16 for $1,100,000

    Current Asking Price: $679,000

    in certain markets, if you look hard, you can find good deals at certain times.

  54. dignanmaplethorpe

    Vanreal,

    That story is from october 2006.

  55. awum

    Housing predictor is predicting that Miami’s median home price will drop to $348,000 by the end of the year, a fall of 12.7%. If that is true, price drops of 20% in certain segments of the market are quite likely.

  56. Annon

    I think anyone trying to give a prediction of when the down turn starts without giving supporting data or specific events would not be convincing enough. Argument like “the housing price is too high and it must come down, and I think it’s sooner than later…” is fine except it is lacking the real important information that people are looking for. When is “sooner than later”? Housing won’t come down until events that drive down the price take place. For example, the down turn will start when:
    1. people start to lose jobs (data from Stat Canada shows it’s still very strong). do you know anyone who needs a job and couldn’t find one?
    2. over supply (current supply is still less than 3 month so it’s still strong). do you still see buyers actively looking to buy? I do.
    3. interest rate hikes enough to discourage buyers (to increase to a level that can significantly discourage buyers, there is still long way.) BOC only increases interest rate at 0.25% each time and it could take more than a year to get 1% change.

    While I believe a correction is necessary, there is just no strong sign of it in Canada yet. It’s almost funny to see bears cheer on a few days of bear data and then to see the numbers reverse and vice versa for bulls. No events that would trigger the real down turn have taken place. Jobs losses in Auto industry and forestry didn’t seem to impact the overall economy too much at this point. As I was saying before, not until what fuels Canada’s market goes dry, the market won’t decline. Perhaps the start of hedge fund crisis can set off the beginning of credit contraction and still, it can take months to hit Canada’s market. And if the money in the market does not contract, the price may never go back down. Fortunately for the bears, this won’t be the case.

  57. Realist

    “It’s almost funny to see bears cheer on a few days of bear data and then to see the numbers reverse and vice versa for bulls. ”

    Actually, the Bears are the ones who ought to be cheering like crazy on each curent-period “bull” day …
    We are so way way way waaay far out of whack with the prices that each day of increase means a much bigger “WHOMP” of a fall…
    The bigger they come, ….

  58. awum

    Here’s something exciting:

    I have long thought that certain segments will lead the way into a slump/crash. I suspected Fraser Valley condos would be a good place to look. So I’ve been watching the housing price indicator (HPI) for Fraser Valley apartments. Using data up to the last FVREB stat package, I got this:

    Month: YoY HPI growth

    Jun-07: 13.20%
    May-07: 18.90%
    Apr-07: 24.20%
    Mar-07: 22.30%
    Feb-07 : 23.80%
    Jan-07: 26.40%
    Dec-06: 26.70%
    Nov-06: 25.50%
    Oct-06: 30.80%
    Sep-06: 32.50%

    By converting the number into a MoM loss in YoY gains, expressed as a percentage, I came up with the following, which I call my “awum impending doom indicator (AIDI)”

    Jun-07: 30.16
    May-07: 21.90
    Apr-07: -8.52
    Mar-07: 6.30
    Feb-07 : 9.85
    Jan-07: 1.12
    Dec-06: -4.71
    Nov-06: 17.21
    Oct-06: 5.23

    AIDI is now entering “holy crap” levels. My AIDI analysis indicates an extremely high percentage chance of impending doom. If you bought an apartment in Whiterock, just drop the “impending” part, the doom is already upon you.

    You can’t argue with stats.

  59. Johnnyrent

    Here ya go Vanreal: http://www.news-press.com/apps/pbcs.dll/article?AID=/20070703/RE/70702065/1075

    Median prices down 16% down as of May and predicted to go down further in Lee County in SW Florida. By the way, roughly 20,000 people move into this county each year, so its hardly a backwater. And, being as lower priced properties tend to suffer more at first, and thereby artificially prop up median prices, you can be assured that there are many 20%+ haircuts here.

    You’ll find similar trends, and some worse than Lee County, in most other FLA markets as you will in most other frothy US markets.

  60. e

    Annon:

    What you said is logical. However, markets are not aways logical. The US downturned without #1, #2 or #3:

    1. people start to lose jobs (data from Stat Canada shows it’s still very strong). do you know anyone who needs a job and couldn’t find one?
    2. over supply (current supply is still less than 3 month so it’s still strong). do you still see buyers actively looking to buy? I do.
    3. interest rate hikes enough to discourage buyers (to increase to a level that can significantly discourage buyers, there is still long way.) BOC only increases interest rate at 0.25% each time and it could take more than a year to get 1% change.

    Seriously, if things were this predictable, everybody would be rich.

  61. George Bush

    anon/rob/tqn/etc: I agree, it’s quite safe to buy in Vancouver now, as you point out there are no signs of a meltdown, and if there were any danger of a crash, wouldn’t you Rennie and others hold a press conference to let us know?

  62. Anonymous

    I’m wondering about Tsawwassen sales these days? Noticed alot of price reductions in the ads.

  63. News Flash

    “I came up with the following, which I call my “awum impending doom indicator (AIDI)
    …AIDI is now entering “holy crap” levels.”

    I bet it is.

    Go back to Fozzies 5 step program and see if you can move past step #1…

    1. Denial : The initial stage: “It can’t be happening.”

  64. just can’t resist commenting on the Tsawwassen housing market. After thinking for years that this market is a total sleeper, I have come to the conclusion that people just don’t like moving to Tsawwassen. There is nothing here! No new infrastructure, no good restaurants, nothing to do for teens………don’t get me wrong, I love Tsawwassen, but it’s just not a “buzzing” place. The people who live here, stay here, and new people will move anywhere else in the lower Mainland than coming to Tsawwassen. It’s a proverbial “dead end”, sitting against Point Roberts to the south. I mean,……where in the Lower Mainland can you buy WATERFRONT for under $1,000,000?? Yep, it just happened here in Tsawwassen. WATERFRONT within 35 mins. driving time of downtown Vancouver. The house on it is even liveable, just above the tear-down stage. The view …….prolly one of the most spectecular views across Boundary Bay you’ll ever see……..Mount Baker in the sunset. This was prolly the cheapest waterfront between here and Mexico. So what is happening in Tsawwassen?? Nothing!! Why? Why is the waterfront here a quarter of the price of what it is for a comparable lot in West Vancouver? I could see half the price. But a quarter of the price?…….anyways, I am just another frustrated homeowner in Tsawwassen, searching for answers about Tsawwassen. Comments are welcome……….(Oh, and by the way, you can pick up a brand new apartment in the “towncenter” for $320 sqft.)

  65. Priced Out

    housebuzz,

    Why are you frustrated? You love Tsawwassen, you live there, you even own a house there. What’s missing?

  66. ObserverX

    Maybe because if global warming accelerates, Tsawwassen will become the newest Gulf Island?

  67. more about Tsawwassen………yes, I am grateful to even be a homeowner, I wish somebody would just enlighten me as to why prices do not seem to rise as much in Tsawwassen as they do in other areas of the Lower Mainland. I pointed out my perceived weaknesses about Tsawwassen, but if you think of it’s proximity to downtown Vancouver, prices should be higher here. Besides, a large part of Tsawwassen is actually considerably above sealevel……..flooding risks here are no greater than Ladner or Richmond. Actually less. Once every 10 years you get a high tide with prolonged high winds, and you might get some minor flooding for 3 hours during high tide.Just like West Vancouver or the Sunshine coast.

  68. aetakeo

    vanreal, are you calling market bottom in the States now? Want to be more specific, or is it “the States” that have lost 2-3% and will now proceed to inflate again?

    Neat.

  69. aetakeo

    News Flash – I’m pretty sure awum is well aware that it is happening, and that’s why it is hilarious. Otherwise, there’d be no joke, you see.

    It’s a little like beanie babies, and those folks who liked to spend thousands of dollars on the tie-dyed manatee limited edition because it’s so totally worth it and a great investment to boot.

  70. Domus

    What’s happening with the numbers……Rob, are you there? Or are you playing a VHB on us and, ta-dah, you are outta here as well?

  71. Annon

    In US,
    1. People start losing jobs. Yes. But the gov’t tried to hide the truth. http://tinyurl.com/2xqszz
    2. Over supply. Yes, I am sure you can easily find articles describing the number of listings starting mid 2005.
    3. Interest rate high enough. Yes. In US, the housing price went up so high that combining the interest rate does discourage real estates. And that’s why there were so many sub-primes, because otherwise no one can afford such inflated RE.

  72. Stealing Ain't Right

    Some guy complaining about Rob’s ethics is ripping off his numbers – verbatim! – and putting them on another blog.

    Now that ain’t right…

  73. househunter

    Just when I thought maybe the crazy speculation would end with increased interest rates and affordability index out of control … Microsoft is planning to open a center in Vancouver. In the next 2 years they will be putting in 800 jobs into the economy. These are not burger flipper salaries. I can see extreme speculation because of this. I’ll be priced out ….. until the olympics are over.

  74. e

    househunter: i wouldn’t worry too much. these jobs will probably average only 70k-80k (based on what is paid in the US), and be mainly for immigrants (most of which are wanting to come to NA for a better life, and have very little in terms of existing assets). 70k-80k income couldn’t buy you much anyway.

    most of these employees will rent (no money for downpayment), and doing so will slow their ability to buy anything just like everybody else.

    you should be more concerned if they came over with boatloads of cash 😉

  75. tqn

    “Your previous response to me indicates that you think there will be a large drop of 70% in prices. So what do you believe?””

    some of the people posted here 50%-70% drop and that is rediculous (that why I said your number was low).
    I think that acceptance of reality will make life easier for some; just happy where you are. Yes, the price is advancing too high too fast, and out of reach for many people; but, that is just the way the market operates.

  76. awum

    The latest REBGV numbers are out.

    Curious, June sales were the “second highest on record,” and yet the YoY increase in Housing Price Indicator continued to fall.

    Sales way up, growth down. Mixed message? Not if you suppose that the market is held back by something significant other than general demand — like affordability maybe?

    Seriously, I suppose this will likely be read as a real good sign for the market, but frankly, if sales are so damned hot, you have to ask yourself, why isn’t it translating into the kind of growth we saw over the last two years?

  77. vanreal

    I am not calling for a US bottom yet. I believe that there was a huge mess there caused by easy credit that needs to be fixed up. I would be very cautious however in saying that how goes Miami goes Vancouver. I don’t follow that logic. Maybe someone here can help explain to me why they see the two cities linked together in some real estate way. I do know that for all of Miami’s nice weather, there are other issues there such as hurricanes, extreme poverty (much broader and deeper than DTES) unsafe areas and also many people don’t enjoy hot humid weather and thunderstorms for five months of the year. I know I don’t. Give me rain anyday.

  78. paulb

    WED and Thurs numbers. Looks like a combined 700 Listings and 430 sales for a list sell of 61%

  79. Rob’s taking a summer holiday at the peak of the meteorological market. 🙂

  80. Johnnyrent

    Vanreal

    Nobody, at least me anyway, is saying as goes Miami goes Vancouver. You asked about FLA statistics and I provided some.

    What I am saying, as are many others, that as go historically frothy, currently or recently overheated US markets, goes Vancouver, and for the same reasons.

    The subprime debacle in the US exaccerbates RE problems there however in the context of frothy markets, subprime is not at the root of the problem. The root of the problem is prices rising too much, too fast and too far away from what fundementals would ordinarily support. Under these circumstances and as history has clearly and repeatedly shown us, corrections are inevitable.

  81. tqn

    “anon/rob/tqn/etc: I agree, it’s quite safe to buy in Vancouver now, as you point out there are no signs of a meltdown, and if there were any danger of a crash, wouldn’t you Rennie and others hold a press conference to let us know?”

    I did not point out anywhere that there is no sign of meltdown; read again. I do not care either a meltdown or a run up; just dont give me the crash sh*t comment like you know it would happen for sure. What next? another US link?
    Fozzie pointed out, acceptance of the reality would make you feel better!

  82. Domus

    Thanks for the numbers Paulb. I appreciate it.
    I wonder what happens to the inventory. It must have jumped back above 12k in just 2 days, if your numbers are right. If sell/list ratios stay where they are at the moment, I think 13k will be reached before the end of July. If they stay where they are for 2 months, we could hit 14k by the end of August……

  83. Fozzie

    Open questions:

    My wife and I met with a realtor last night (to clarify my earlier post, we still want to live in this city, we have simply “accepted” that without a price correction, we probably cannot afford it.)

    We described our situation and our concerns about affordability. In particular, I commented that I was apprehensive about taking on a massive mortgage – 500K +. The realtor’s response was this:

    “Don’t think of your mortgage as something you have to pay back, that’s an old fashioned way of thinking and it’s too depressing. Just try and think of it as a vehicle you need to get you where you want to be.” ?!?!?!?!?!?!

    I asked him if he could explain that concept to me in more detail, because I was having a hard time wrapping my head around the idea. He went on for a few more minutes, but I confess I was unable to follow his logic. I understand the concept of growing into a large mortgage, but he kept repeating the phrase “don’t think of it as something you need to pay back.” I wonder if my bank/lender will allow me to include this provision in the mortgage document.

    My questions are these:

    1. Can anyone help me understand what this realtor was talking about?

    2. Is this type of thinking common and is it one of the reasons why I can’t afford a home despite a decent down payment and a reasonable family income? Am I competing against buyers that are not as “old fashioned” as I am, and have rationalized that a massive mortgage is okay because you don’t have to pay it back?

    I don’t mean to be so sarcastic, but this realtor’s comments really confused me. I feel like I’m missing something here.

  84. awum

    Come on Fozzie, don’t be thick. Your realtor was simply pointing out that obviously Vancouver real estate is so cool that it will always continue to appreciate faster than your (and everyone else’s) earnings, so you’ll be making way more money than that pittance you’ll be shelling out in mortgage interest. He’s been right about that for the last five years, so why not the next five?

    Where’s the logic hole in that?

  85. Fozzie,

    If you get a 40 year interest-only mortgage, you are really paying rent to the bank for the rest of your life. So, in that sense, its not something you have to pay back.

    Also, there is no debtors prison. If, for whatever reason, you can no longer pay at some point, the bank just takes back the house. The taxpayer takes the hit through CHMC.

  86. awum

    Priced Out, you have pointed out something which has bothered me for some time. The ease with which banks currently hand out mortgages with no downpayment has put people with no savings at a distinct advantage over us stodgy folks that do. A 10% – 15% loss in house prices would essentially wipe out my savings — bankruptcy won’t protect anyone from losing their savings to pay off the mortgage debt. A young fella with no savings basically has nothing to lose by over-extending except his credit rating — and if that were to happen as a result of a housing meltdown, you can expect he’d have so much company that it wouldn’t matter much anyway. Where the f&%k were the bankers with their zero down mortgages when I could have used them about 7 to 10 years ago? Jerks. Fat ugly jerks. Put em all in jail. With he child molesters.

  87. Domus

    Awum:

    that’s a fair description of the selection issue in the buyers’ market. At least that’s what has been happening in the US: people with some money down have been reluctant to gamble it, but people with no money down have figured that the upside (appreciation) was better than the downside (lose credit record but nothing else). This is also a result of more lenient personal bankruptcies laws: within 5 years (probably less, given some loopholes) you can be back on track with a clean sheet and a fresh start. Even better: banks have all incentive to lend to you again, as they can insure out the risk of default by simply forcing you to buy additional insurance.

    What really strikes me as odd is: why insurance companies are willing to insure zero dow payment mortgages at relatively cheap rates? This is changing fast in the US, but I don’t see much discussion in Canada.

    CMHC did lower to 20% the minimum down payment required to go insurance-free. But I bet most condo buyers and even several SFH buyers don’t have 20% to put down. They should be skinned by insurance costs, but they are not. Someone will take a hit soon: I only hope that they won’t find a way to charge the taxpayers for the speculators’ losses……

  88. Priced Out

    My bad. CHMC still requires 20% down. But I’m sure ways will be found to spread the losses among the innocent.

  89. Bank Shark

    Foz, don’t worry, you don’t have to understand it, just trust the Robs and the Aarons, and your mortgage broker, they won’t steer you wrong.

    When you go to renew you mortgage, and interest have gone up, we will find a suitable plan for you. Perhaps a one hundred year mortgage to keep the payment low, so that you can also afford the loan to fix the leaks.

  90. vanreal

    There are still lots of places to buy in the lower mainland without taking out a 500,000 mortgage, however the sentiment on this blog seems to be that if you can’t live on the westside or at least in Vancouver in a sfh, then things are overpriced. There are many places in the outlying areas that would let you get your foot in the property door. Awum doesn’t want to leave his view and his cheap rent downtown and that is his decision. Great if he believes that continuing to pay rent is the only way to go at this point and he is unwilling to sacrifice his standard of living to buy then more power to him. It is a risk however in that he doesn’t believe rents will go higher and that house prices will drop. This may not happen. When we bought we made huge sacrifices in our standard of living. Our mortgage was double our rent payment and we probably bought at a bad time in the market cycle. We were naive buyers. However it has worked out for us over time.

    Just one more comment about rents. The house beside us just listed a suite (main and top floor) for 2800. The previous rent was 1700. They had 45 responses to their ad and it was rented in two days.

  91. Domus

    The rental market seems mysterious to me. I cannot make sense of it: supply is more than keeping pace with demand, but still there is a low vacancy rate that pushes up prices.

    Walking downtown I notice that towers are half lit over night: many units sit empty. I am talking about an apparent half of the units. That might explain things: either some people invest in housing an drely on pure appreciation (no rent) or there are a large amounts of apartment which are not primary residences/ Either way, i see this as a government failure to incentivize occupation by taxing empty places differently, as it is the case in many European countries.

  92. Anonymous

    Domus,

    Isn’t it obvious? Most of the transactions nowadays are by flippers/speculators. If they rent the place out, they won’t be able to sell it in a short period of time. Don’t be supprised if you see lots of vacant units but no vacany sign.

  93. Deedub

    …a government failure to incentivize occupation…

    This was tried in many of the ex-Communist countries. The incentive for making sure habitable buildings were fully utilized was “if you share, we won’t send you to prison”. It didn’t work too well, despite the rather strong incentive.

    If we did it here it would be just another gross market distortion with the usual unexpected downsides.

  94. vanreal

    There was an article in the Sun last week saying that many people just park their money in Vancouver real estate for safety. Maybe they don’t even care if their is price appreciation as long as it doesn’t depreciate. They use it as a safe haven in an uncertain world.

  95. Getreal

    Vanreal,

    Based on your groundless “rear view mirror” views, It’s no surprise at all that you were naive buyers.
    Mind telling us what wisdom and credentials you have aquired since then?

  96. Spectralshift

    1. Can anyone help me understand what this realtor was talking about?

    I think this was covered above. You don’t have to pay back the debt so long as you can carry it forward. I don’t agree with it, FWIW, but it depends on your goals more than anything else.

    2. Is this type of thinking common and is it one of the reasons why I can’t afford a home despite a decent down payment and a reasonable family income?

    Yes. The amount that people can afford has been increased simply because many are pushing their limits, and mostly in the case of the US, how much they need pay in interest. An interest only loan at ~6% will cost you ~$540/month per $100,000, inclusive of taxes… that’s a big difference compared to the ~690 they’d have to pay otherwise.

    It’s an artificial way of increasing the cost vs value of a home, but it still works. People may lament the hundreds of thousands of dollars they have in their mortgage; but they still only pay the monthly fee.

    3. Am I competing against buyers that are not as “old fashioned” as I am, and have rationalized that a massive mortgage is okay because you don’t have to pay it back?

    That wouldn’t be the main reason, but probably does play a part… The better question to ask yourself is if they are wrong. In general, buyers have a massive advantage over renters by not having to pay interest on any savings they do accumulate. They are buying an asset with debt – a debt that is paid back with ever less valuable dollars. This gives a double whammy to renting – rents and housing prices both increase with general inflation while the debt itself decreases in value as the value of the dollars you pay it back with decreases.

    Ignoring the bull/bear argument, you had to be very certain of yourself to be a bear in the housing market to the point of choosing not to buy for an equivalent rental amount. And of course, there is also the question of when one accepts when one was wrong about the market. That was a year and a half ago for me, though I only hedged my bets by buying small. If the market crashes, I may lose in absolute terms but I’ll move up to what I really wanted… and if the market continues to rise, I’ll stick with the place I have. I may not win, or lose, as much as I could of… but it’s a place to stay and I’ll be mortgage free in a couple of years. I’m happy whichever way the market goes and no longer emotionally invested in the argument.

    Instincts tell me that I was wrong in being a bear and that while the markets do rise and fall due to their nature, the better choice was to take the one in which the dice are weighted for. I just wouldn’t bet the bank!

  97. Domus

    Deedub,

    what about higher capital taxes if a unit is sold withing two years? Does that sound like a gross distortion of the market then?

    I think there is a balancing act here: if houses are for living in, maybe such a rule is not so crazy. I am pretty confident that many flippers would think twice before engaging in the money-spinning activity.

    I am not suggesting it should be done: I am telling you that it would probably work.

    Also: can you please explain to me what is the benefit to society of flipping and why it should not be taxed? Is buying and selling a title in a new building that has not been built an economic activity that creates wealth, welfare for other people? is it comparable to the services of a taxi driver, doctor, teacher?

    Mind you: I am not talking about estate agents, who actually may provide expertise and save time to buyers and renters. I am talking about taxing people whose only activity is to buy titles with no money down and resell them after a few months.

  98. An

    One thing I’ve wondered is how peoples perceptions have changed in the last 2 years. How many people that are predicting a drop in the market now would have purchased 2 years ago? When the drop eventually comes and if the drop is 20-30% it’s still a losing situation as the market has gone up 20-30% in the last 2 years..

    It’s all fine and dandy to wait for the drop and then say “I told you so”, but really, when did you first start saying so?

  99. bubblegazer

    HOLY COW, I’ve just figured out Vanreal’s true identity….are you ready for this?….she is actually the former relentlessly nagging “oracleofvancity” who’s demise some of us had cellebrated with blissful relief.

    I mean, could it be humanly possible for more than one person to be driven to such a tenacious need to defend a potentially declining asset?

    Get a life.

  100. Fozzie

    Spectralshift,

    Thanks for your thoughts.

    By the way, we didn’t choose not to buy. We started our down payment fund in Oct. 2004. I feel like I’ve been wrong every step of the way. Call me conservative, but at that time I was convinced that by paying off all debt first, working hard and saving diligently, I would get ahead. Instead, the market has rocketed away from me and I’ve seen many people save nothing, borrow everything and make giant stacks of cash in the process.

    Oops, I feel myself slipping back into stage 2 – anger 🙂

    Anyway, we’ve been leaning toward the hedge option you referred to.

  101. Fozzie

    Correction, I guess I did choose not to buy. I chose not to buy until I had a down payment. With the benefit of hindsight. I should have bought the cheapest, ugliest, leakiest condo back in Dec 2004 as soon as I had scraped together $5,000.

  102. paulb

    current count from wed-now 947/596 0r 63%. I have the same info Rob does but the area may be off a bit. This is however a very good indication of whats to come from Mr. Chipman

  103. An

    Spectralshift,

    That was one of the best comments I’ve read here in a long time. Nice to read something from someone not screaming ‘the sky is falling’ or ‘the sky is rising(?)’. Your thought process and decision are refreshingly balanced.

  104. Domus

    Spectralshift:

    I am sorry but your argument still doesn’t convince me. Or better. it still relies on substantial appreciation over a non-negligible time horizon. In other words, continued inflation in house prices.

    However, we are discussing the very real possibility that prices might drop.

    I ran the numbers. Suppose you borrow 350K in mortgage for a place in year X. Your argument goes: inflation eats into the real value of you debt. True.

    Suppose inflation is 2% per year. After 2 years the real value of your debt is roughly 336K. Great.
    What if after 2 years you also have a 10% nominal depreciation? You would need to borrow only 315K, even assuming you reduce your downpayment proportionally!

    Let’s do it over 4 years: real value of your mortgage will be 323K. In order to have a mortgage of the same size (and substantial savings on downpayment) you would need a 7% nominal drop.

    So, you see: if prices keep going up, you are right (regardless of any other consideration). You are also right if you consider more than 10 years, for sure that would make sense. But if you look at a shorter horizon and you are not happy with what you can afford today, you have to ask yourself: do i seriously think there might be a price adjustment in the next 2 to 4 years? If the answer is yes, it is worth waiting . If it is no, then go ahead and buy.

    My hunch is that prices have become so extravagant that a major correction is due. I don;t know whether it will start in 2 months or 6 months from now. I would bet money that it will be year within 2 years. I think that people who have not bought back in 2002 have a better deal waiting at this point. They might hget more bang for their money.

    One last note: if inflation goes wild, so do incomes. Which would mean your house would also lose value in real terms, unles it follows inflation itself. Past history shows that hyperinflation eats into housing values……

  105. jesse

    “1. Can anyone help me understand what this realtor was talking about?”

    The Realtor is implying a shift in how one views debt. Places in Europe carry mortgages with terms longer than natural lives.

    The concept is that servicing long-term debt is preferable to paying it off. Think of it like a government never paying off the national debt; it’s better to use the cash for today and service the debt than pay it off. And you pay it off with tomorrow’s money which is huge.

    Ultimately you will probably be better off owning but there are risks around job loss and interest rate increases. You will probably be OK but these days there is a non-zero chance that you will not and you may be in big trouble.

    Domus’ comments about the mentality of 0% downpayment investments compared to something with a sizeable downpayment are intriguing. The other thing to mention is that banks, after having too many of the 100% mortgage guys fall flat, will overtighten lending standards and dry up the buyer pool. Then cash is King.

  106. Spectralshift

    An, my pleasure. I don’t normally have much to say here. My opinion is that I have no opinion. I reserve making an opinion for when there is data that is conclusive. Posting that over and over would be rather boring. I’d rather discuss strategy to deal with the uncertainty than claim certainty.

    Fozzie, I was (am?) in the same boat as you. The two factors that made me change my mind were…

    1) I ran the numbers… they supported buying a place, both financially and as a hedge. This is, of course, from my position in life. What they did not support was me buying a half million bungalow home – not that it was an option. I’d been saving for about 6+ years before then and had about 70,000… I was unwilling to pay less than 25%… It’s why I didn’t buy earlier. After being wrong for most of those years, I ended up buying a small apartment in Vancouver based on practical metrics – time to work, time to shop, transportation cost. Stuff that matters for my QOL, rather than buying a house in the middle of nowhere.

    Having said that, it’s important to remember that there is a large risk in buying in a heated market… in any market for that matter, but the variance in a run up can be horrible. That, and the strategy requires you to sacrifice some of your “dreams” temporarily. I was ideally looking at a (1.5 years ago) about a 450-550k aparment. Since I wasn’t going to pay that – not an affordability (entirely!) issue but a risk issue – at this point in my life, I aimed for about half.

    2) My GF and I wanted to move in together and we wanted someplace central for both of us. Moving meant I had to make a decision rather than rerun the numbers everyday! Sometimes we need to be pushed into making a choice.

    FWIW, I wouldn’t get angry. I don’t know your situation, but I’m not like most of the professionals at this board. My GF and I both work and neither are on super wages. So I can say with a fair bit of certainty that I believe that you will get ahead with your attitude… keep yourself objective, keep saving and making diligent decisions. Becoming emotionally involved in the market is a mistake, even in jest. Be careful in reading people’s opinions… they seep emotion. Simply evaluate the strategy. I’ll suggest only one thing everytime – run the numbers. Make the best decision that you can with the way the world is… for you to reach your goals, for you to live your life, for whatever else you love. Using up energy talking about what could happen is better spent looking for ways to deal with what could happen.

  107. Domus

    “….for you to reach your goals, for you to live your life, for whatever else you love. Using up energy talking about what could happen is better spent looking for ways to deal with what could happen.”

    Spectralshift,

    I am sure you are a nice guy and in perfect good faith. I just want to warn you about one thing: those last few sentences are dangerously close to RE agents’ “talk”……especially the bit about the life you want to live. Want is not necessarily can.

    Making a decision does not mean to rush into a decision. If insane market conditions can perpetuate themselves for many years, it does not mean they are less insane. I still remember January 2000, when people were calling tech-bears names like “crazy”, “losers”, “bitter”.

  108. The unthinkable"Renter"

    spectralshift, Some people have too much money to put down on a home in an out of control market. Maybe I should give all my money to my parents to holn and buy in with 5% down. That way the government can’t get me. CHMC can lick my furry crevass down to my smelly nut dispenser! Sorry,this market is beyond reality. If I am wrong, thats ok too 🙂

  109. Spectralshift

    Domus,

    My only points were;

    The markets are biased towards rising at least at the inflationary level, rent is biased to rise at least at the inflationary level, debt is biased toward being paid back with less value dollars at least at the inflationary level.

    Regarding hyper inflation eating away at housing pricing, I’d have to see some evidence that doesn’t correlate to high interest rates, which is what I believe would be the root cause of the correlation. I don’t know how that is even possibleto figure out…

    In any case, my comments are agnostic towards pricing while yours are not. I cannot predict the future and I make no attempt to do so. If you are confident enough in your choices, pick a higher risk profile, which is what you do if you pick renting with the intent to buy at some point in the future. Every year that you rent rather than buy, you roll the dice on market prices. These dice are weighted against the renter. As an example of where this falls apart is the bear view of the bull run that started a little more than 2 years ago. To return to what I said;

    At the CPI index from May 2001 to May 2007. All only at the inflationary level;

    Rents have risen during the time roughly increasing your payments 13%.

    Your 350,000 mortgage “carrying cost” has dropped to ~308k and the pmts by the same ratio.

    And if housing prices do track inflation, as an outside influence (regardless if markets rise or fall at market whims), the house value is now ~395K.

    Yes, the markets can crash more than this, or the markets might not be correlated with inflation perfectly. They could rise more than this, inflation could go up and down… But none of those affect the underlying bias.

    To use an analogy – I could assume that the QQQQ will crash 20% in the next year and start dollar cost averaging now. Every strategy that assumes future pricing in a market that is biased to rise is wrong the majority of the time. In dollar cost averaging, about 70% of the time. In real estate… I have no idea. But it has even more bias than the stock markets, unless you borrow tons of money to play in it.

    Anyway… the point was… Hrmm… I forgot what the point was.

    Right… same as before. Renting while waiting to buy in a correction will lose you money more often than you’ll gain it. Predict away… but like poker, I tend to win when I follow the odds and lose when I listen to my hunches. Most people do, of course.

  110. Spectralshift

    Domus,

    I’m not sure what you are saying. If you disagree with something I’ve said, factually, bring it up and I’ll hash it out. I explained what I did, why I did it, and how it worked out. I can dredge up the numbers that show why I did it, how it was worked for me, and what it cost me. The analysis, the results… I offered my advice off of this, which didn’t include a single thing about if he should buy or sell. What exactly do you have a problem with?

    As for your warning… Duly noted. I’d refrain from… what exactly? Telling someone to keep saving, not to buy over his head, consider hedging his bets, talking about the effects of renting, look at the big picture, don’t get wrapped in the argument, don’t make an emotional decision? My goodness, I didn’t realise real estate agents did all that. If they did, I probably would think more of them.

  111. News Flash

    “Walking downtown I notice that towers are half lit over night”

    Awum when you were walking downtown did you leave the lights on at your place? Do the people walking by your place think your rental is an empty spec house? FYI – People downtown often go out in the evening and turn the lights off.

    I love the theory that the speculators have bought all the properties and have them sitting empty. This simply makes so sense. Someone do the math for me and show me how a speculator can make money or has made money letting a place sit empty?

  112. Realist

    Domus:
    “Also: can you please explain to me what is the benefit to society of flipping and why it should not be taxed? Is buying and selling a title in a new building that has not been built an economic activity that creates wealth, welfare for other people? ”

    Actually, according to the Canadian Income Tax
    Act, it already is taxed….
    Its just that there appear to be many individuals in this Vancouver market, maybe even some of the bulls reading here, who are committing Tax FRAUD when they are filing there current tax returns… and havent realized that CRA have now improved their methods of cross-checking…

  113. News Flash

    “My wife and I met with a realtor last night …He said…

    “Don’t think of your mortgage as something you have to pay back…Just try and think of it as a vehicle you need to get you where you want to be.”

    “I asked him if he could explain that concept to me in more detail… but he kept repeating the phrase “don’t think of it as something you need to pay back.””

    In today’s dollars Fozzie. That is the beauty of a mortgage (long term dept) you borrow at today’s dollars and pay them back with 50 cent pieces later after inflation kicks in. Your wages are indexed with inflation but your mortgage is not. As your wages increase your mortgage becomes a smaller part of your income. If you can afford 500K today, in 10 years it will seem small and be less than rent. In 15 years it will seem like nothing.

    “2. Is this type of thinking common and is it one of the reasons why I can’t afford a home despite a decent down payment and a reasonable family income? ”

    Yes that is exactly right.

    “Am I competing against buyers…and have rationalized that a massive mortgage is okay because you don’t have to pay it back?

    In today’s dollars… yes you are getting it.

  114. Johnnyrent

    News Flash

    Here’s your math. Buy a $500,000 pre-sale condo for a 10% deposit of $50,000. Wait a year before the place becomes occupy-able and you are committed to purchase it. Over this 12 month period, your condo’s value has increased 15% or $75,000. Now you flip it, and before closing costs and sales commissions you’ve just earned 150% on your investment.

    Let’s say you hold on to it for another year and you finance the $450,000 you owe at, say 5.5%. Your carrying costs including maintanence are roughly $40,000. During this year, your now $575,000 condo goes up another 15% or $86,250.

    Your investment over two years is $50,000+$40,000=$90,000. You sell the condo for $661,250 two years after you bought it as a pre-sale and one year after you purchased it outright. Before closing costs and commissions, you’ve made $121,250. Who needs the hassle of renters?

    Now, let’s take the greater fools buying now at $500,000 and assume a 10% correction a year later. Same $50,000 down. Flipper goes to sell his place coincidentally with occupancy only to find its worth 10% less than he committed to. Now, not only has he lost the $50,000, but he’s offside for closing costs and selling commission, to say nothing of opportunity cost.

    Actually, even in a market where a speculator’s place is worth no more than what they committed to, they’re still off-side via closing costs, selling commision and opportunity cost. This is one way that inventory ramps up, as speculators panic, and rightfully so, when the peak has passed and the train starts its downhill ride. You can see it in action all over the US and we will see it here in the not too distant future.

  115. “What’s happening with the numbers……”

    Maybe Rob is fed up with providing free info, and taking a lot of shite for it. Can’t say I’d blame him.

  116. Domus

    NY Times piece on housing: inventory in Seattle is growing among fastest in America. Share of houses with reduced prices increasing fast.

    As I have said many times before, only people who bought before 2004 can feel safe….

  117. News Flash

    Johnyrent,

    Nice try, but we are talking about empty liveable units not presales. Presales are not built so how can they sit empty?

    Do the math again but:
    1. Make it a livable unit so it can sit empty
    2. Deduct Property purchase tax
    3. Deduct the real estate commission when you sell
    4. Use the appreciation over the last year
    5. If you use a down payment factor in the GIC you could get with the money.

    Lets see what you come up with.

  118. -A-

    Interesting, News flash must have the same dead short in his logic processing area of the brain or maybe it’s Rob.
    So in your make believe world, inflation eats up the debt load, but interest rates stay at record lows forever.
    Sure file this one under, “real estate has never crashed in Vancouver, because we are land locked”

  119. Johnnyrent

    News Flash

    I don’t understand your comment. I specifically outlined a scenario where a place fully owned and occupy-able sat empty for a year. This scenario could easily be extended for any number of years. Its quite simple; I’m not inclined to continue calculating it for you. I suggest you revist my post.

  120. DeeDub

    Maybe Rob is fed up with providing free info, and taking a lot of shite for it. Can’t say I’d blame him.

    Who is the clown ripping of his numbers and words and slapping them on a makeshift blog without so much as a link back to Rob?

    That is seriously classless.

  121. paulb

    This is Realtor info its hardly sacred text… ROLLEYES

  122. “Who is the clown…?

    That is seriously classless.”

    I thought that it was funny at first, but changed my mind (blame it on the “3 o’clock wow”).

    I don’t think that it will last long.

    Though, it is said that imitation is the best sort of flattery.

  123. “This is Realtor info its hardly sacred text… ROLLEYES”

    Oh, frack! I’m so confused. I give up, and am going to bed.

  124. mike

    We miss you, Rob! Come baaacck

  125. DeeDub

    This is Realtor info its hardly sacred text…

    If the numbers are so important to whoever that clown is, he can make the effort to generate them himself. What he’s doing is stealing, plain and simple.

  126. Skeptic

    Maybe its Rob himself. Got sick of the current crop of posters on his blog and decided to start afresh !?! 😉

  127. LesserApe

    There are a couple of flaws in your reasoning, Spectral. First, you can’t use 2001-2007 as a realistic time range to determine if real estate is a good investment. Return change dramatically based on starting and ending dates, so taking the biggest bull market that Vancouver real estate has ever seen isn’t a particularly good range for extrapolation.

    Second, I’d agree that you want to bet on loaded dice, but the valuation determines how the dice are loaded. You can’t just take an arbitrary time, and say that because an asset has gone up long term, it’s more likely to go up than down. If the valuation is too high, then it’s more likely to go down than up. So, if you believe the markets are significantly overvalued, then the dice are weighted against you. (Though, if you thought that when you bought, the markets were fairly valued, then your reasoning would be OK.)

    I think your approach of using reasoning instead of emotion is totally the way to go, but one also can’t take shortcuts in the reasoning.

  128. Domus

    I must say that the guy who is stealing Rob’s number is quite a clown. I have my disagreements with Chipman, but I have always said i am grateful for the numbers. For some reason I trust his numbers and I think he is a good enough guy, considering he is in the RE business…..I am not going to read the other guy’s numbers, unless he starts collecting and processing them independently.

    I really wonder what’s up with Rob. Skeptic is back: maybe he can help to clarify the mystery? Some big sale brewing? The flu? New girlfriend? I miss the numbers……

  129. vanreal

    Maybe he is sick of his blog becoming vhb 2. Full of whiny bears.

  130. Anonymous

    “Maybe he is sick of his blog becoming vhb 2. Full of whiny bears.”

    Vanreal, you are blessed with some very dry, witty humour……

  131. Skeptic

    Hi Domus, sorry, glad you missed me. I have a life outside of this blog and in case you hadn’t noticed from your place (basement suite ? 😉 ), the sun has been shining. Busy with work, busy with family and enjoying our beautiful province.

    Don’t know where Rob is, suspect its a similar story though, busy buying/selling for people, working on his reno or maybe he extended the long weekend.

    What’s the link to the other guys blog, maybe we should all head over there and tell him what we think ? So are his figures only up till Tuesday as well ?

  132. spectralshift

    LesserApe,

    Re: 1)

    The time period used did not include any market appreciation, only the theoretical inflation increase. The reason I used that time period is because it is roughly how long I’ve been hearing – and a part of – the bear argument.

    Re: 2)

    I actually agree. My underlying point is that the markets are biased, and as I said initially, you must be very sure of yourself in order to take the bear position. Fortunately, there are no lack of very confident predictors of markets. The original comment was also that you hedge risk, not that you buy outright. Everyone needs to buy with caution, to some degree.

    The inflationary argument was to point out why having “permanent” debt wasn’t a bad idea… well, not automatically. I still think it is a bad idea, least for my own goals.

  133. paulb

    what is this stealing blog your all talking about??

  134. Domus

    Skeptic,

    if I told you where I live you would not believe it……I will leave it a mystery, things are more fun that way. It’s not a basement suite, although I would rather live there than buy in this market if I was a first time buyer……

    Paulb,

    see this http://robsnumbers.blogspot.com/

  135. crasher

    It might be tempting to claim that we are immune to bursting bubbles in distant places like Florida.

    How about exploding inventory in Seattle?
    http://thehousingbubbleblog.com/?p=3062

    How about Edmonton (take a look at the graph)
    http://www.edmontonrealestateblog.com

    It could be easy for anyone stuck in denial to sleep through the wake-up call.

  136. Woodenhorse

    solipsist:
    “Maybe Rob is fed up with providing free info, and taking a lot of shite for it. Can’t say I’d blame him.”

    Here, Here!

    And regarding that “rob’s numbers” blog, that’s really….really low f&*king class. Domus, I didn’t know that site existed until now, and I will do my best to forget it from here on. That said, RC is posting these on the internet, if those knobs at the other blog want to copy/paste and chat….let ’em, I think we’re better off here with their energy going there.

  137. Johnnyrent

    Has anyone considered that Rob might be ill or have had an accident. I hope neither is the case, but I sense he’s bigger than to have a hissy fit over someone esle posting his numbers.

    I hope, Rob, that all is OK with you.

  138. deb

    I too hope Rob is okay. Hope he is just busy with real estate. I miss the numbers more than I would like to admit.

  139. “Rob might be ill or have had an accident”

    Funny (?) but I had thought of that. I thought of my own blogs, and how if some ill befell me, nobody would know. I thought of telling someone my password – just in case. Though, come to think of it, ill has befallen me – I’m brain-dead…

    I also thought that he may have gone to holiday, but would likely have mentioned it.

    Maybe the #’s are really, really bad.

  140. Domus

    1) I hope Rob is fine. That’s for sure!
    2) If he is fine, I hope he is just busy and not playing mind games with other bloggers. I would lose esteem if the latter was true. Hope he is just making money with RE, as he always says….
    3) In any case, I think the numbers are pretty bad for July: Paulb gave a preview peak (see above) and it seems that sell/list has been around 60% in the past few days. Kind of slow for July……

    The number I most miss is the inventory: I think it might be already above 12,100……..and growing fast. In any bubble there is a rush for the exits at some point: I wonder when this will start for Vancouver RE…..or maybe now that old Bill has come to town we will become a truly international services hub and prices will go up even more!

  141. Strataman

    I’m thinking of opening a blog called Freako’s thoughts. What do you think?

  142. Strataman

    How about “MUSINGS OF THE POPE” or ” UNREAL CONDOS” I have terrific sources of public information.

  143. Concerto

    Unlike the other blogs, we actually KNOW WHO THIS BLOGGER IS. Someone here must be a friend or customer of Robs.

  144. Domus

    I miss Freako’s comments. I think he is one of the few guys who makes sense. He does not get along with Rob and does not want to discuss things on this blog. To a certain extent I sympathize: there have been times when Rob has tried to drive me crazy with his rather nonsensical comments on RE, but I think it is our responsibility to keep on rebutting the bulls’ propaganda, especially in times when it seems that our battle for rationality is losing ground.

    In any case, if Rob does not appear any time soon, I think he will simply lose the following he has established in the past few months (especially after VHB disappearance): that cannot be good for him, as they say in advertising “you don’t care whether they talk good or bad about you, as long as they talk about you…..

    I think the bears’ blogs are regrouping and becoming more interesting: they only need a good RE agent who can provide daily numbers and then they would be the favorite source of info for many. However, the reason I like this blog is the presence of the bulls: I try to keep an open mind and regularly measure my thoughts with those of bulls. I always think that if I am wrong I would like to realize it sooner rather than later: however, to date, there is no single convincing argument for the bulls apart from the incredible run-up in prices. All arguments, in one way or another, rely on the assumption that prices will have to go up: some say because of inflation, China and Hong Kong, psychology, shortage of land, immigration, house hoarding and who knows what else. Nobody can really make an argument for bulls when prices will eventually go into reverse……sorry guys, but I am bery bearish on housing, even more than when I started reading this blog!

  145. Coq_Mike

    I completely accept that most all markets rise and fall. Some bears have been saying things like:

    “The correction is well under way”
    “Could soon see prices down as much as 30%”
    “Recent buyers will regret their decision”

    I mean if interest rates went up to say 8 – 9% and or BC started to post increasing numbers of job losses I could see the housing market going for a spill.

    Is there any reason why prices might just correct by say only 4-6% followed by a flat balanced market for several years?

    If I saw this market correct by a real 10% I would probably buy. Now, some people will say why buy at 10% when you might be able to buy at a 20% correction. The only thing I would fear is missing out on some good deals as other buyers jump back in the market while I wait and watch for the big correction.

    This market still seems very desirable even at the current prices levels.

  146. dyugle

    FWIW my wife works in a law firm and their conveyancer is super busy. Works weekends and some nights to 3 am. She has looked for some help but all conveyancers are busy. She says it is due to a large number of completions lately so the property titles are all being transfered. How would this affect the market if true?

  147. vanreal

    Domus, What is the bears’ argument for a large price correction. The fundamentals imbalance? I don’t know if that argument is any stronger especially if rents increase as they seem to be doing

  148. The unthinkable"Renter"

    What’s with this Bears/Bulls bullsh*t?

    Why not post average family income in yvr.

    Average family mortgage. approx $300K?

    Economy’s ability to maintain steady work for workforce.

    Number of houses owned per family.

    I went for a walk today and counted 3 empty homes over $600k on one block here in Burnaby.

    Rob’s giving us a piece of the puzzel with his numbers. Now can we all put something together here and find a reasonable/agreeable conclusion?

  149. little voice

    rob:
    come back pls!

  150. Domus

    Rents have a gigantic leap to make in order to bring back equilibrium in the Vancouver RE market.
    A jump of such proportion is only consistent with sustained inflation.

    Not impossible, but would not bet on it.

    The other way to back to equilibrium, of course, is what buyers like you fear most. The US scenario…..

  151. tqn

    same discussion, debate, day in day out…could be one of the reason that makes Rob stop posting!

  152. deb

    wow I am really missing Rob’s regular numbers and posts. I hope he is okay and that he comes back soon.
    This is such a great service and no one else is doing it.

  153. mk-kids

    My husband & I are moving out of the city. We completely, on a point of principle, refuse to pay $1800 for a 750 sq foot 1 bed & den. This suite should rent for maybe $1300. When are people gonna get sane & simply refuse to give all their money, their future earnings to greedy grade 8 dropouts and the development buddies? Sad.

  154. REsteven

    another source for Vancouver RE numbers.

    http://vannumbers.wordpress.com

  155. Johnnyrent

    Referencing the article tqn just posted, one wonders how carefully Tsur Somerville has considered Vancouver’s RE history or the profound effect that altered psychology is having in metro markets all over the US.

  156. "The data thief"

    REsteven, thanks for stepping up to the plate.
    I will shut down my blog, and link it to yours.

    Good work,

  157. Lohachitronotsompatana

    Looks like Rob has abandoned this blog.

    New picture every day but no numbers.

  158. Domus

    Lohachitronotsompatana:

    if that’s the case and Rob is just playing mind games, then I lose much consideration for him. This site had become an interesting forum for debate, finally free of the monotematic bull’s rants and open to more frank discussion.

    I sincerely hope this is just a blip or that he has some big sale to make and no time for the blog.

    Yes, the picture is changing, and makes me think he is doing voluntarily, though…..

  159. tqn

    “…then I lose much consideration for him.” Does he care?

    “finally free of the monotematic bull’s rants and open to more frank discussion.” sure hope you will get the place you always dream of!

  160. awum

    I’d give odds that the changing picture is a WordPress feature rather than evidence of a sinister plot. That’s just me …

  161. Annon

    On the about page, Rob’s contact numbers are listed. Feel free to give him a call.

  162. Domus

    tqn,

    no need to be bitter. I have always written what I think and I always reply in a civilized way to other people’ s opinions. If Rob does not care, so be it.
    I am simply stating that an open forum, with all opinions allowed, is better than a place where everyone agrees with each other all the time.

    As i mentioned many times before, I like Rob’s numbers and I respect Rob. It does not mean I agree with him on RE. If this forum comes to an end it will be a pity: i would be careful not to blame only some people…..

  163. robchipman

    Annon:

    I can’t believe it took so long for someone to figure that out.

    Awum:

    I changed the picture. The question is: where is it from?

    Domus:

    “monotematic bull rants”?

  164. passerby

    http://www.news1130.com/news/topstory/article.jsp?content=20070709_181357_1172

    “Lucas says the overall message from the survey is do your best to buy now because prices are not likely to drop.”

    Ain’t this lovely ?

  165. robchipman

    Tsur Somerville said about the same. As I’ve said many times, I have no idea where this is going. As a result I wouldn’t say to someone “Buy now before you’re priced out”, but, judging from the BoC paper on duration of markets and Vancouver history, I wouldn’t conclude that this market must implode either.

  166. News Flash

    Tsur Somerville:

    “Nobody credible has predicted a price decline.””

    “We are closer to the end of the cycle than the beginning of the cycle, but I don’t know where the end is.”

    “People have this notion that when the cycle ends, housing in Vancouver will be affordable.” He laughs. “Get real. When you look at other world cities with limited land and active economies, prices are high. If you want to get rid of the ALR, fill in the ocean and flatten the mountains, well, that’s my recipe for affordability.”

    Anyone think they will fill in the ocean or flatten the mountains before the Olympics?

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