Real Estate

Vancouver housing bubble?

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Jul 16, 2003
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But Mark.. read his post carefully and you will see he used words commonly found in your posts. I dont see any attack!?
Andre Oliveira - Mortgage Agent
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Jun 28, 2007
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Mark77 wrote: Wow, talk about an exaggeration. I've kept no secret of the fact that my training and expertise is largely in a deeply cyclical sector of the economy that is highly over-supplied (hundreds of resumes received per position). It speaks to your character that you attempt to make a mockery out of such. Nobody in the engineering profession actually believes the unemployment rate is "below 3%" (in professional circles, its estimated at closer to 50-60% since that's the number of people who graduate yet can't obtain professional licensing due to poor employment prospects).

Last but not least, it is rather telling that you've chosen to attack the messenger, rather than the message. You never used to be this bad. Do they give you some gold star down at Bentall every time you write an anti-Mark77 post?
Dude, don't get so upset - I've only paraphrased stuff that you yourself have said. That's hardly an attack! Would you like me to quote you directly instead? Why does actually repeating what you say on these boards make me "bad"?
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Feb 7, 2006
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Mark77 wrote: If you look at the numbers, prices clearly oscillated in a band somewhere between around $500 and $200, but there wasn't that much of a trend towards upwards movement. That's generally 'pretty flat', with some general cyclicality as would be expected in a commodity.

Quite unlike, for instance, oil that started the 2000s at $20/barrel (give or take), and is today sitting at an average of $90-$100 for WTI. That's not flat at all -- that's a trend that exceeds inflation, even when you remove the cyclicality.

I stand by my comment. It seems that you have little better to do with yourself than quibble over some numbers which haven't shown a meaningful excursion from the mean, except for cyclicality and seasonality over the past decade. The numbers show that lumber clearly has undergone cyclical, not secular changes in price.
You seem to have a small issue comprehending.... :facepalm:

you have little better to do with yourself than quibble over some numbers which haven't shown a meaningful excursion from the mean
Seriously take a look at yourself. You have been quibbling over a supposed real estate crash for 4 years.

Then you post this:

Mark77 wrote:Sure, but did they buy them brand new? Go back, read my comments more carefully, and then respond. I didn't say that single people don't live in SFH's. I only said that they certainly weren't (generally) buying them brand new at undepreciated prices. Obviously a used house is worth less than a new house.

This has to be the dumbest thing you said yet. You have no clue, none, nada, zip.
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Feb 15, 2008
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MMMM wrote: You seem to have a small issue comprehending.... :facepalm:
No I don't. Do you even know what you're trolling about anymore? Sounds like the person with no clue is the one who keeps asking the same question without even bothering to read the response given which answers the question in full.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Feb 7, 2006
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Mark77 wrote: No I don't. Do you even know what you're trolling about anymore? Sounds like the person with no clue is the one who keeps asking the same question without even bothering to read the response given which answers the question in full.
No Mark you didn't answer the question, you blabbered on for a few words but as per usual you said nothing. You obviously have no idea how the housing industry works, let alone even the simple concepts of how a house is constructed and the costs involved. Amazingly enough you manage to spit out enough junk to make it sound like you do. And as soon as anyone points out your obvious errors you start with the attacks. You need to grow up Mark, accept the fact your wrong and move on.
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MMMM wrote: No Mark you didn't answer the question, you blabbered on for a few words but as per usual you said nothing. You obviously have no idea how the housing industry works, let alone even the simple concepts of how a house is constructed and the costs involved. Amazingly enough you manage to spit out enough junk to make it sound like you do. And as soon as anyone points out your obvious errors you start with the attacks. You need to grow up Mark, accept the fact your wrong and move on.
Hardly. You're the one who keeps asking the same question, has been given a response numerous times, and can reply with little other than random jibberish that makes very little sense. Hence, you're the one who needs to stop spitting out the junk and actually contribute something useful to the thread. After all, its you who is starting with the attacks, instead of refusing to discuss the issue. Bringing some issue that was thoroughly settled many pages in the past, back to the forefront.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Nov 23, 2007
413 posts
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Just wondering what is the point of 305 pages of arguing back and forth. Don't any of you have anything better to do?

Incidentally I know there will be a huge housing crash, based on the inevitability of higher interest rates in the future, plus the math behind a positive feedback loop.

But that is beside the point. If you don't think there will be a housing crash, go out and buy a house. If you do think there will be a housing crash, don't buy a house. In the time spent arguing back and forth for 305 pages, you could have chopped down the trees and built a house by hand.

In case anyone cares, the clear reason why a housing crash will happen is simply positive feedback:

1. Interest rates rise
2. Fewer people can afford to buy, so less demand, as higher interest rates means higher monthly payments.
3. Some people with highly leveraged mortgages can't afford to refinance at higher rates when there term is up, or can't afford payments if they have a variable rate mortgage, so they have to sell.
4. Fewer buyers (#2) and more sellers (#3) means lower prices.
5. As prices drop, that segment of the market who was in it for speculation/investment, rather than actually needing housing, drops out of the market, when they finally realize it is no longer a sure thing.
6. Prices drop further, more people start to panic and sell.
7. As people begin to default on mortgages, lenders tighten up there lending criteria. Foreclosed properties add to the glut of real estate on the market.
8. Go back to step #2, repeat the cycle a few times.

I have seen a few speculative bubbles in the past 25 years of investing. Most notable, the tech bubble. For about 3 years before the tech crash, it was clear to me that it was a speculative bubble and would crash. P/E's of 200 to 300, companies making no product and with no profit being valued at hundreds of millions of dollars, anyone who started a company with "dot com" in its name instantly getting rich. When I spoke to people about it, I was laughed at, clearly I was just jealous because their Nortel stock was doing so well. What surprised me was how long it took for the bubble to burst. I had thought it would be a few months, but it took several years for the crash to happen.

Back in the tech bubble days, there was no shortage of pundits and analysts who derided the idea of a coming crash. Just like now when real estate industry insiders publicly ridicule those who predict a crash.

My home was paid off long ago, I will be buying a nice retirement place in Vancouver, after the crash. Instead of arguing back and forth, look at the facts, look at the opinions presented, choose what you think is right, and put your money where your mouth is.
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Feb 15, 2008
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As predicted, one of the early signs of a housing collapse is a revulsion to credit expansion. This time it is hitting the developers:

http://business.financialpost.com/2013/ ... =5f78-a284

I apologize, a Toronto-centric article, but credit rationing is now well upon us as banks have decided that it better to pull the plug and collect higher spreads, than it is to be commit mass suicide and be left with a ton of non-performing assets.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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calgaryacct wrote: Is the Canadian Market Falling apart:-

http://www.cnbc.com/id/100725735
Is that "price to rent" chart accurate? Looks a bit exaggerated to me. When I've run the 'math', I get a P/E ratio ("E" being after-tax, with all depreciation items, etc., removed) in the 35 range. The chart, by claiming strict "price to rent", is claiming something much worse.

Still, not a bad article overall.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Jun 28, 2007
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Mark77 wrote: Is that "price to rent" chart accurate? Looks a bit exaggerated to me. When I've run the 'math', I get a P/E ratio ("E" being after-tax, with all depreciation items, etc., removed) in the 35 range. The chart, by claiming strict "price to rent", is claiming something much worse.

Still, not a bad article overall.
I'd be interested to know what sources of data you are using in your math? Specifically what earnings/rent series are you using to compare to prices? What geography? What time frame is your comparison based on?

In fact, it would be acceptable if you just provided us a chart or table of your mathematical analysis since you've already done it. Thanks.
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gomyone wrote: I'd be interested to know what sources of data you are using in your math? Specifically what earnings/rent series are you using to compare to prices? What geography? What time frame is your comparison based on?
http://www.statcan.gc.ca/tables-tableau ... 8a-eng.htm

$70k average Canadian household income. Average Canadian house price ~$400k. 1/3rd of pre-tax income, tops, for housing expense (imputed or actual). So average of $23k available for housing, figure $4k/year for utilities leaves around $19k/year average available for rent.

A $400k housing unit using the 1% rule for depreciation pulls that $19k by $400 down to $15k. Figure another $3k in insurance/property taxes, down to $12k.

$12k / $400k ~= 33X earnings pre-tax. Tax on $12k @ 32% for a landlord ~= another 2-3k Which pretty much matches the chart (all rough numbers of course).

Except, as I pointed out earlier, "the chart" is stating a 35X rent to house price multiple, "rent" generally being a term for raw cashflow (or EBITDA if you want to use stock terminology), rather than 'earnings' (which is when you include all items).

That's Canada-wide of course, but the cities quoted, that converge at 35X make up a pretty large amount of Canada. Multiples in depressed and/or rural areas aren't nearly as bad, but then we have Vancouver at a quoted 60X for the chart.

The point of my post, of course, was to state a belief that I believe the chart slightly exaggerates just how bad things are in Canada. Still pretty bad though.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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RedRyder wrote: http://www.cbc.ca/news/business/story/2 ... ntals.html

Toronto Condo rents rise 10% in 2 years as rental demand outpaces sales.
A good sign for the bulls, but given the avalanche of new supply, how much longer can that be maintained??

Also given the deluge of brand-new, un-depreciated supply in the marketplace (especially with ancillaries such as gyms, saunas, concierges, and similar being present in many of the new build high-rises), the rents may very well be expected to naturally rise along with a rising quality in the overall rental stock. This doesn't mean that an existing unit is necessarily rent-able for 10% more than 2 years previous.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Dec 10, 2008
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1% rule for depreciation? LOL

Tell that to the homes that are 50 years old and still command a higher asking price than new spec houses. Unless of course you mean 1% for maintenance, at which point I'd mention that I don't know many people who are spending $4k+/yr to maintain their homes.
Let's hug it out

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