October Stats Snapshot

Benchmark Price November 1 month change ($) % change
Detached $730,022 -7,905 -1.1%
Attached $454,645 +1,701 +.38%
Apartments $371,418 -300 -.008%

 October sales volumes rebounded, coming in higher than last month and beating October ’06 by 11.2%.  Inventory dropped 5% to 12,915 active listings (from 13,574 in September & 12,939 in August), and down just over 10% from 14,445 in October of ’06.  YTD sales numbers are also up compared to 2006. The drop in inventory is probably due to soft/negative price growth during the month.  Compared to October of ‘06 prices are up 11.4% for detached properties, 11.4% for attached properties and 10.8% for apartments.  September’s numbers were 11.9%, 10% and 11.1%, respectively.  The sell/list for October was 62.83% was (compared to 69.05% in September, 76.77% in August, 78.66% in July and 76.7% in June).

The combined changes mean we have 4.09 months worth of inventory (MOI). Counting back from September through December the numbers have been 4.89, 2.74 3.32 3.18, 3.10, 3.78, 3.32, 3.92, 4.89, 6.2. It was 2.92 in June ’06.  Although high compared to the past year, an MOI under 5 should be considered low.  With inventory dropping there is a chance that MOI will also drop, and that will extend the upward pressures on price.  As we look for a top in the market we’ll have to keep a close eye on both total inventory and MOI.  Low inventory and low MOI without significant price growth may indicate that prices have risen as high as they can go.

Out of 29 sub-areas (detached/attached/apartment over 15 areas, minus areas with less than 20 sales during this month or last month), 14 saw a drop in the median selling price, while 15 saw increases.  Burnaby dropped in all three categories,  Coquitlam, North Van and East Van dropped in 2, while Maple Ridge, Port Moody, Richmond, Vancouver West and West Van dropped in one category.  No area rose in all three categories, but Maple Ridge, New West, Port Coquitlam, Richmond, Vancouver West, and West Van rose in two categories, while Coquitlam, Delta, North Van, and East Van rose in one category. 

 

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57 Comments

Filed under Monthly stats

57 responses to “October Stats Snapshot

  1. vw

    Thanks, Rob.

    Any data for Surrey?

  2. vanreal

    I don’t see how meaningful stats are when compared to the previous month. That is not really a trend

  3. richard stat-guy

    It would be better to have pie slice stats reflecting the real world: how many units in the below $500K range, $500K-$800K range, 801K-1Meg range, 1.01Meg-1.5Meg range, and 1.51+Meg range.
    That way, you follow can the relevant economic cohort.

  4. joe

    Geez, you people sure ask for a lot considering the fact that this site is a FREE service. Just appreciate the numbers, and stop bitching about not having pie charts and what not. If you want them, go make them yourself and post them! Sheesh.. sometimes I wonder how Rob puts up with some of you folk..

  5. Priced Out

    Talked to a local banker. He told me prices have been dropping in the last couple months, though its mainly seasonal. He did expect more than just seasonal cooling down the road, probably after the Olympics.

    He expected Canada to follow the US as it drops interest rates, even though BOC doesn’t really want to and its mostly a bad thing.

    The main reason Vancouver is different, according to him, is foreign money gushing in. Particularly, Korean money. He said Koreans have spending heavily on Vancouver real estate, even more than the Hong Kong Chinese in the 90s. Why would Koreans be so desperate to move money out of Korea and to Vancouver?

  6. Concerto

    Because they’ve only recently been allowed to

  7. e

    reading back to the 80’s is very similar tho. i remember back then the newspapers were saying
    – running out of land
    – foreigners with lots of money
    – mild climate
    – expo 86 , etc

    will be interesting is van is diff this time.

  8. Johnnyrent

    Thanks for this comprehensive report on the numbers. The more to chew on, the more meaty the inevitable debate becomes.

  9. Priced Out

    So this is a novelty for Koreans. They are probably making many mistakes if they haven’t done it before. Is the money here longterm? Are they considering building our economy or is this just purely real estate speculation? Do Korean specuvestors just want to be our landlords? Are we talking endless amounts of money? Will it eventually run out on its own or only after our economy goes down the tubes…or never?

  10. Anonymous

    Rob – thanks a bunch for the time and effort to put the numbers together. I appreciate your investment in making this a great site.

  11. Jay

    Does anyone know anything about these ‘tax sales’ each city puts on at some time or the other? They seem too good to be true. Rob, I’m sure you’ve had some experience with these.

  12. WoW

    Dear Rob,

    Thank you for these numbers, they are great – for those looking for pie charts and the like….let them eat cake!:))

    Much appreciated.

  13. coco

    richard stat-guy,

    I understand your curiousity. Only Chilliwack reports their sales numbers by price groupings. It is interesting to see how many units are selling at what price range at the bottom of the page.

    http://tinyurl.com/3cou8c

  14. coco

    Scotia Bank takes $190-million hit from ABCP exposure

    http://tinyurl.com/39x4ho

  15. coco

    paulb,

    I saw the news story on that Bloor Street condo building yesterday. Seems even realtors were buying for themselves and flipping the condo to another person at the back of the line.

  16. paulb

    On Global Chris the business guy mentioned extreme caution and refernced 25 years ago…….

  17. coco

    Sell Raw Logs To China? Of Course, Its The Canadian Way Of Doing Things : One Man’s Opinion

    http://tinyurl.com/3c6q73

  18. c0c0

    Bank of Montreal, National May Take C$1 Billion Writedowns

    (Wow…no one time Visa ipo gains to offset these losses as these banks promote Mastercard)

    http://tinyurl.com/2m688b

  19. blueskies

    Winnipeg had a condo unit sell for $1.25-million.

    what is wrong with this picture?
    it had to have been a spectacular unit.

    re: the Korean money

    if you follow the money it will go from weak South Korean hands to strong Canadian bear hands in due course…….

    some patience is required

    great article find paulb!

  20. coco

    High loonie could brake economy: Bank of Canada

    http://tinyurl.com/ytuur4

    (a different tone from the BoC, but no hint at a interest rate cut yet)

  21. robchipman

    Coco:

    Re: Ben Meisner’s article which you link to.

    What’s the alternative to selling raw logs? What’s the alternative to trade? I realize that Canada faces a challenge competing in a very big world, and I’m probably missing something, but if China can buy our raw resources and produce finished goods more cheaply than we can, how do we answer that? Do we restrict the export of Canadian raw material and add value here? And isn’t “value” measured by how much the Chinese (or whatever competitor) can do the same refining for?

    I’ve run across the example in doors. Our Douglas Fir is exported to China, turned into doors, shipped back, and sold for less than $200. Apparently we can’t make the same product here for that price (or so I’m told). In fact, the old price, when the doors were made here, was closer to $500.

    Another example of the same phenomena is a Candian company called Gildan. Apparently they want to knock Fruit of the Loom off the perch, and have bought many US textile companies in the south. I believe that, in addition to shutting down uncompetitive Canadian operations, they’ve used the US acquisitions to access US markets through companies like Walmart, while moving operations to Central America.

    It seems to me that the elementary solution is to go back in time to when other people couldn’t compete. The fact is, that won’t work, so what do we do now? Aside from the regular complaints, are there any viable solutions?

  22. Tony Danza

    Rob, Here’s a simple cap rate calculator:

    http://www.forbes.com/fdc/rentorsell.shtml

    I think you’ll find that the investment scenario you proposed in North Van is not viable. With no expenses whatsoever related to carrying the property (maintenance, insurance and taxes) and no closing costs on the purchase (550k) you would have to rent the place for $2600/month to make it a marginal investment.

    Add in your expenses and the monthly rent required is more like $3000-3500 per month, you’re not going to get that in North Van on a 550k house.

  23. Tony Danza

    Just for fun the 2 bedroom (1200 sqft) condo my brother rents in the WE is valued by the owner at $260k excluding all costs (maintenance, tax, energy and condo fees). Whether the owner realizes this or not is debatable.

  24. coco

    Report sounds city jobs warning Vancouver’s tax rates, regulatory burden turns off businesses, which are also needed to sustain high lifestyle quality.

    http://tinyurl.com/34smck

  25. blueskies

    Rob:

    are 50% of your clients speculators?

    wow!

  26. coco

    Rob,

    I’m not sure what the answer is either, but outsourcing more jobs to China so we can pay cheaper prices for goods not the answer either.

  27. coco

    We might need good paying jobs to buy those houses.

  28. robchipman

    TD:

    Did I miss something? You and I came up with the same cap rate, right? And, you pointed out that cap rate is simple math, so why do you need a web based calculator?

    Additionally, I didn’t propose the North Van investment. You asked about IRRs and I used it because we just crunched some numbers on an existing property. Its an example of current cap rates and IRRs, and I’ve said that they aren’t that good. It seems that we’re not really in disagreement over investment on the surface.

    But thanks for the pointers 🙂

    Blueskies:

    Like I’ve said many times, I don’t speculate, and I don’t counsel it as an investment approach. Some of my clients are speculators, but not many.

    Coco:

    I think you’ve hit on the real problem: two negatives don’t eqaul a positive in real life!

  29. Tony Danza

    Rob,

    I suggested the calculator because you didn’t calculate the cap rate correctly. You excluded all your costs and assumed an unrealistic income (or you did include your costs and assumed a huge unrealistic income). I thought I could subtly point out your error, sorry.

  30. Tony Danza

    If you’ve sold any properties in your target area for investment in the past couple years then your clients are speculating on continued appreciation of their investment. That’s the only way their “investments” could make any sense, they’re speculating that either prices are going to keep climbing or rents are going to magically skyrocket. I would enjoy seeing you prove otherwise.

  31. robchipman

    TD:

    I’m going by memory, but I think that within the last two years there were buys with solid numbers, but I will also say that my numbers do assume a long term CA of 5% (and that’s all up front). I personally got 2 properties in 2005 that were positive cash flow with less than 25% down and pretty good numbers all around. That may not qualify as a smart investment for you, but those are numbers that have worked great for lots of people over very long terms.

    In terms of doing cap rate, you don’t know what numbers I used aside from price. I didn’t share costs or income.

  32. Annon

    I don’t think outsourcing overseas is the real problem. The real problem is the creation of money out of thin air by central banks worldwide. Government made us believe that it is normal to have:
    1. artificially inflated economy
    2. inflation rate of 2% excluding food and energy

    So the economists over at the government don’t eat and need no heat? It’s ridiculous to have nurses and bus drivers asking some $40+ an hour with expensive retirement pension plans. Any job with low entrance (skill) barrier should never be as high as they have been. How do we ever compete with 3rd world labour force? What, the government or the people didn’t see this coming? The CEO’s ridiculous compensation is yet anther thing that people just accept. For sure there is lots of room for improvement.

  33. Tony Danza

    If you know how to calculate cap rates then yes I do know what numbers you used. You gave me two of the three variables in the calculation, so it’s pretty easy to figure out what you’re using for income (and income includes costs, I assume you know this). I mean I don’t care how you’re making your own investment decisions, fill your boots, but if you’re handing out advice to the general public or your clients then that’s a different story.

    FWIW it seems you’re confusing cap rates with overall rates of return, appreciation will only affect your rate of return, it has nothing to do with cap rates.

  34. robchipman

    TD:

    “I suggested the calculator because you didn’t calculate the cap rate correctly. You excluded all your costs and assumed an unrealistic income (or you did include your costs and assumed a huge unrealistic income). ”

    -and-

    “You gave me two of the three variables in the calculation, so it’s pretty easy to figure out what you’re using for income (and income includes costs, I assume you know this). ”

    It seems to me that you’re saying two different things: 1) I either included or excluded costs when I calculated revenue vs 2) you assume I know income includes costs.

    To be a little clearer, cap rate is net income/price. In my case I used a net rent of $1,900 per month ($22,800 per year) and divided that by $550,000 (22,800/555000) and got 4.15%.

    You’re right that if a/b=c and I give you 2 of the three variables you can determine the third. But does that mean you can determine whether the a was net or gross? You came up with 4%, right? Let’s do the math: 550,000*4%=22,000. 22,000/12=1,833. You and I differ by $67 per month. Where did I go wrong? 🙂

    I think that multiple posts are confusing you as well. I never said CA goes into cap rates. You said “If you’ve sold any properties in your target area for investment in the past couple years then your clients are speculating on continued appreciation of their investment. That’s the only way their “investments” could make any sense, …” That wasn’t restricted to cap rates. That was a more encompassing “make sense” test. I couldn’t disagree with you completely, because I used investments that made sense but assumed a 5% CA/year. That’s not the same as trying to include CA in a cap rate (and I guess you could do that, but you’d have to assume growth and add it to income the way you would extra cash flow like garbage or parking). Anyway, I didn’t do what you’re saying I shouldn’t do.

  35. blueskies

    question for Jeff

    what is your take on the Remax report released yesterday and also the PwC report just released.

    what does this mean in the trenches?

  36. Spencer

    When interested in a property what is the right price to use in your offer?? Let’s assume their is no other know competition for this property.

    I hold to this and will always offer at least 10% off the current listing price. I will offer NO MORE than $500K for a $550K listed house. If it sells to someone else then move on to the next one as it was not meant to be. A few extra tricks include not using a Realtor to buy a house giving you some leverage to meeting closer to the Seller’s bottom price, and researching/researching/researching both the market and neighborhood for comparables.

    Key questions to ask when viewing a property:
    How long have the current owners had this home?
    Any outstanding issues that need/should be fixed?
    How many different 90 day MLS listing cycles has the home had in the past couple of years? What were the prices for each listing?
    How serious are the sellers? Nothing worse than wasting your time in negotiating.

  37. blueskies

    How long have the current owners had this home??

    Also why is the owner selling?

    and my fav: Is the owner a realtor?

  38. Spencer

    Why is the owner selling? This one be prepared to hear a few creative lines. The best one I heard was a young family in a 1500 SqFt home. Their anser to this question was because it is too BIG…wherease the our first thought was the opposite. I just could not believe this one as it was barely enough room for them let alone adding more kids or having visitors stay over. From my observations, the seller must have been a professional story teller as she really did not reveal any obvious physical charactersitics you would see in most people that tell lies. I won’t tell what her career was but it did involve commission sales.

    Learn to ask the questions and be able to determine fact from …….you know what I mean.

  39. robchipman

    Spencer:

    A disciplined systematic approach is always a good idea, but there is an obvious flaw: what if the list price is excellent value? Do you still refuse to pay it? And is that sensible?

    The questions you ask should be asked by all buyers, and any Realtor can find you most of the answers quickly (determining the seriousness of a seller is tough for many people under many circumstances).

    Your approach can certainly result in a good buy if you’re a good negotiator. There are some implications there for sellers to consider when thinking about retaining a Realtor, and one obvious one I think you’ll agree with: if the Realtor is going to be negotiating with you (a very real possibility) then the Realtor better be good.

    Quick question: if you’re not using a Realtor, who writes the offer for you?

    Blueskies:

    Realtors have to disclose when they’re selling or buying properties for themselves. That’s the law.

  40. Tony Danza

    Sorry Rob, I guess sarcasm isn’t conveyed very well in this medium. When I said that I assume that you know that income includes both positive and negative income I was being facetious.

    I am pretty sure that you know how to divide one number by another to find a ratio, my six year old son can do this as well. The erroneous part of your analyses are your assumptions. I can make any investment look great if I make up whatever inputs I like.

    I clearly said that in order to get a 4% cap rate, you have to make some ridiculous assumptions about your income and expenses. And yes $1900 income is a ridiculous assumption for a $550k North Van property. I assumed you don’t know how to calculate cap rates or that you were using bogus inputs. Where’s the confusion?

  41. robchipman

    TD:

    You asked for some IRRs (“More interesting and applicable: what IRR’s and cap rates do we see here?”)

    I gave you one and said “That should tell you that investment buys are tough to justify these days”.

    You then told me how to do cap rate and IRR, showed me that we had essentially the same cap rate, and added “This example is very telling about RE investments and realtors in Vancouver today”.

    Aside from your shot at Realtors I think its fair to say we both agreed at this point, at least on cap rate numbers and the quality of this investment.

    I then pointed out that your assumptions appeared flawed. That was a pretty broad hint.

    You responded that I “…obviously don’t understand IRR or cap rates”

    I pointed out that you were making assumptions, again.

    Even though we agreed on cap rate you pointed me to a cap rate calculator. You also said that “I think you’ll find that the investment scenario you proposed in North Van is not viable”. Of course, I had already told you that in the beginning, and in no way, shape or form did I propose it as an investment.

    You maintained that I “…didn’t calculate the cap rate correctly [because I] excluded all your costs and assumed an unrealistic income (or you did include your costs and assumed a huge unrealistic income)”.

    I hadn’t told you I was using actual rents at that time, but it was a bad assumption on your part to think I wasn’t. I remedied that and told you I was using actual rents on an actual property.

    Then you said “it seems you’re confusing cap rates with overall rates of return” (when I clearly wasn’t, supported, again, by the fact that you and I got essentially the same cap rate).

    Now you’re saying something different: “The erroneous part of your analyses are your assumptions”. I’m not making assumptions, except on the value of the property, and its a well grounded assumption.

    Your final question clears things up: “I assumed you don’t know how to calculate cap rates or that you were using bogus inputs. Where’s the confusion?”

    The confusion is in your assumptions, not mine. I told you that I was using actual rents, and you either missed it or ignored it.

    You really want to ask a question: Where can you get $1900/net income on a $550,000 property in North Van?”

    Its a good question. It is an illegal triplex, in a non-conforming structure, on an inferior lot in arguably one of the less desirable parts of North Van. Its not for sale, and hasn’t recently been sold, so we estimated its value. You can’t re-build what is there, and while the numbers on this property are better than what you’d find on many other North Van props (typical of non-conforming properties) its a bit of a three legged dog. As I said in the beginning, not a good investment based on current numbers, but it might be a good candidate for a trade up. If I increase the value of the property the IRR and cap rate get worse, agreed, but I already said this was a bad investment. Do you want me to fudge the numbers to make it look worse?

    Anyway, bottom line, I didn’t make assumptions. I used actual rents on an actual property. You can argue that the land value should be higher than $550,000, but its a good figure.

    Anyway, its all in fun, right? You ask for an IRR and cap rate, I give you one that’s handy, and real, and you take me to task even though we agree that the cap rate is what it is, that the property isn’t a good investment, and you don’t really know the details.

    Small request: next time, before you decide I’m wrong, dishonest and recommending things that I’m not recommending, read the posts.

  42. Geezer

    Blueskies wrote:
    “re: the Korean money

    if you follow the money it will go from weak South Korean hands to strong Canadian bear hands in due course…….”

    Yeah, people from Hong Kong have no idea about making money either – gasp, rolling of eyes.

    Let me rephrase your comment:
    …it will go from foolish South Korean Millionaires hands to smart Canadian basement suite renter’s hands.

    Yeah, that’s going to happen. Either you are joking or you haven’t been to Seoul during the last couple of decades.

    Sorry, but that really p***ed me off, I’ll go and drink my warm milk and calm down now.

  43. REcrash

    I’m tired of folks who say “but Vancouver is different”. Because… of the mountains, the ocean, the olympics, the quality of life, whatever reason. Like there are no other NICE places in the world to invest in real estate. How about southern California? A little less rain. They had similar comments a few years ago and look at their prices now! How about the south of France? How about Florida? Vancouver is nice, sure, I wouldn’t live here otherwise. But come ON!

  44. Tony Danza

    Right Rob, all in good fun, except that this is your livelihood and based on your answers (and arguments) to my elementary questions I would say that you’ve proven your level of investment acumen in spades. What speaks even more to your acumen is the fact that you never bring up these elementary tools in any of your discussions or examples. Investors that I socialize with and work with (although not RE investors at this time) will discuss these metrics until your ears go numb. I owe all of the prudent (in hindsight) and lucrative investment decisions I’ve made to these same people. I digress.

  45. robchipman

    TD:

    Yup, all in fun. Which is why, I guess, you can ignore the facts (like when you say I’m wrong when in fact we agree, or when you say I propose an investment when in fact I don’t do anything of the kind, or like when you say I claim we came up with the same IRRs when in fact I said we came up with the same cap rate). You’ve now arrived at a point where you criticise my opinions because…I haven’t shared them enough! What other conclusions are you prepared to reach based on information that you don’t have?

    The last time I discussed an example of an investment property we talked about all these things you claim I don’t talk about (the 4th street duplex). Prior to that the example we discussed was probably on my old blog. I think I’ve maintained for quite a while that its hard to find properties in the Lower Mainland with good metrics. This isn’t a revelation. Nobody is disputing it. You actually have to bend credibility to maintain that I’ve recommended that people buy investment property based purely on the metrics in the present market. I’ve even stated (repeatedly) that the current market is not a good one for me precisely because its hard to find good buys for my clients, which is why I’d be much happier with a constant 5% per year ca rather than what we’ve seen. Do you just ignore those statements because they don’t fit your assumptions?

    My arguments answering your elementary questions revolved around you making assumptions and deriving conclusions from them, despite being told that the assumptions were wrong.

    I really think you’ve got some other agenda that you’re trying to pursue, because frankly, we’ve come up with the same numbers and the same conclusion regarding the investment in North Van. All we really disagreed on was the value of the property (you made an assumption, I used an educated evaluation made by another Realtor).

    We also both agreed, in the beginning, that this particular investment wasn’t a good one, and that its hard to find good metrics anywhere in the Lower Mainland these days.

    You turned that into me not understanding cap rates or IRRs, proposing bad investments and being dishonest. You’re basing that on the mistaken belief that I’ve somehow recommended things I haven’t recommended, and assumptions, which you made, which were incorrect.

    You’ve been wrong on this, time after time, and not on the math. You’ve been wrong because you’ve drawn conclusions from assumptions that you incorrectly treated as fact.

    Its easy to throw out the criticisms, especially from anonymity, but that doesn’t make it right. Your argument with me has changed throughout the thread, from doing the math wrong (you’re letting that go now) to me making ridiculous assumptions (I made none, and you’re letting that slide now as well) to me not discussing metrics until your ears go numb. If you really had a bone to pick it was the value of the property, and you could have simply asked the question early on.

    Is it possible that you’re hearing, and disagreeing with, something that I’m not actually saying? And why not answer some of the questions? Can a trade up be beneficial at this time? Why do some rational, and well informed investors, buy when metrics like IRR and cap rate look less than optimal? Are they all speculators?

  46. Tony Danza

    “Are they all speculators?”

    Yep.

  47. robchipman

    Tony:

    I admire the confidence required to write other people off so easily, but I’m going to disagree with you. The metrics change over time, and can be influenced by the owner. Rational investors buy properties with bad metrics for a variety of reasons. Somtimes its pure speculation, but often its part of a longer term process that will deliver good metrics.

    On a related topic, metrics often deteriorate with time. Should all rational investors sell should that become the case?

  48. Tony Danza

    “On a related topic, metrics often deteriorate with time. Should all rational investors sell should that become the case?”

    Wouldn’t that be the definition of a “rational” investor?

  49. robchipman

    That’s answering a question with a question, which I think indicates that you don’t know the answer to the original question (the answer is “no”).

    I’ll answer your question, though: no, that would not be the definition of a rational investor. I think that the reason you think it is the definition is because you are overly concerned with ROI with the “O” representing “on”.

    The interplay of investment goals and the risk/reward relationship renders means that different people make different decisions, and yet each of them can be rational.

  50. Tony Danza

    Ok Rob, so not only are you turning literary theory on its ear now you’re taking on economic theory?

    If a person makes a choice that does not provide him with the most pay off for the least amount of work/risk, then that person is irrational, this is by definition of the economic term rational. Just because you say so does not change the thousands of human years spent developing and investigating economic theory.

  51. robchipman

    Tony:

    Are we dealing with another case of you thinking one thing but writing another?

    “least amount of work/risk”?

    If only the world were so simple. Faced with a choice between hard work and high risk on the one hand, and no work and no risk on the other, what would any rational person choose?

    Neither one, obviously. You’ve neglected reward, which is critical due to its ommission.

    Once you introduce a subjective choice, for example high risk + potentially high reward versus low risk and likely low reward, you’ve allowed for two rational choices based on personal preference.

    To argue otherwise is to say that return trumps risk. The mere introduction of the concept of maximixing return renders your position irrelevant (you get the part about return “on” versus return “of” investment, correct? You understand that when you introduce variables like risk and reward you allow for different, yet rational, choices, right?)

    Nobody’s inventing anything new here. You’re just simplifying things excessively.

  52. Tony Danza

    Rob you need to work on your cognitive skills:

    I wrote:
    “the most pay off for the least amount of work/risk”

    You wrote:
    “You’ve neglected reward, which is critical due to its ommission.”

    So pay off and reward are two different concepts according to you and you then base your reply on my “ommission”. You have an interesting way of formulating your arguments Rob. How can I discuss something with someone who can’t even comprehend a simple statement?

    You wrote:

    “Faced with a choice between hard work and high risk on the one hand, and no work and no risk on the other, what would any rational person choose?”

    What does have to do with my post?

  53. Tony Danza

    “You’re just simplifying things excessively.”

    No Rob, you just have a cognitive disconnect.

  54. robchipman

    Fair enough. I have a cognitive disconnect. The most reward for the least amount of work/risk does indeed assume the existence of reward. Full points to you on that score.

    The problem remains: you depart from the regular risk/reward relationship, which assumes that higher rewards go hand in hand with higher risk. Instead, you seem to define reward as an undifferentiated commodity; its the same for everyone.

    That’s great for the formula, but it flies in the face of reality. Risk/reward assumes a variety of both, and allows for different personal decisions.

    Let’s get it out in the open: are you saying that there is only one correct investment decision for any given set of investment criteria?

  55. Tony Danza

    No. I am saying why would I invest 550k in a house that might return 1-3% a year before costs (and historically appreciates at a rate that matches inflation) when I can invest in a diversified publicly traded company that pays a 2-6% dividend (and I can assume to appreciate by the historical 6-8% that equities achieve long term)?

    As far as risk/reward goes where do you see the greater potential: a highly profitable dividend paying company like Wells Fargo, share price beaten down for being in the same industry as the likes of Citigroup, or a marginally cash flow positive dwelling whose price has appreciated a record amount over the last 4-5 years? If your pay cheque didn’t depend on you overlooking this disconnect which would you choose?

  56. robchipman

    Tony:

    Nobody suggested the NV property was a good investment based on the current numbers. That approach is a red herring. In fact, when we began discussing it I wrote:

    “Cap rate on the above is about 4.15%.

    That should tell you that investment buys are tough to justify these days.”

    You somehow turned that into:

    ” I think you’ll find that the investment scenario you proposed in North Van is not viable.”

    And now you’re trying to frame the argument in terms of me recommending an investment that I never recommended. You’re consistent in changing your position and ignoring your own statements, if nothing else! 🙂

    I haven’t recommended buying any investment real estate that doesn’t have good metrics, ever, unless there is some other over-riding reason. You’re tilting at a windmill that doesn’t exist. You’re implying that I’m dishonest, and that I’m being dishonest because my paycheque depends on it. You’re incorrect on both counts, but that’s not the first time your assumptions cost your credibility.

    To answer your question: I don’t know enough about equities investment to give advice on Wells Fargo, or whether buying a stock because it has been unfairly beat up is a good approach (there are a lot of assumptions in the brief analysis you provide), but as I’ve already stated my position on real estate investment, its sort of moot, right? I’m not buying investment real estate right now, and I’m not recommending it (unless there are other reasons that over-ride the regular metrics). You’ve finally admitted that rational investors can pursue differing strategies, so you can’t really disagree that there can be reasons to buy real estate today, even if they are rare.

    Summary: I can calculate cap rates, I’m not recommending many RE investments these days, my paycheque doesn’t depend on investment sales, you and I largely agree on the current market. Where exactly is the disconnect? What, exactly, is the problem? 🙂

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