Real Estate

Vancouver housing bubble?

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  • May 25th, 2019 2:05 pm
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Deal Expert
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Feb 9, 2003
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Langley
It's hilarious seeing the Realty Industrial Complex lobbying hard to kill the stress test. What a bunch of dishonest jerks - constantly claiming that the stress test is bad for first time buyers. And it's funny too that they think that would make any difference in this pending real estate and economic collapse. Sorry guys, the Golden Era is over.
Deal Guru
Jan 27, 2006
10516 posts
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Vancouver, BC
i6s1 wrote:
Mar 15th, 2019 4:48 pm
It's hilarious seeing the Realty Industrial Complex lobbying hard to kill the stress test. What a bunch of dishonest jerks - constantly claiming that the stress test is bad for first time buyers. And it's funny too that they think that would make any difference in this pending real estate and economic collapse. Sorry guys, the Golden Era is over.
They know what side the bread is buttered on and right now they are seeing that they might not be able to afford that butter!

What I like is that they can't even get their story straight - one minute they are saying that the prices are fine (hence their 'model' price to represent a 'typical' home) since it only dropped 0.6% in the past 6 months, then turning around and producing statistics that show the average sale price has dropped at least 10x more than that!

A news article was published a few days ago which stated that the majority of the formerly hot real estate markets across the globe are now seeing large sales volume and price reductions - ie London, NYC, LA,... that can't be blamed on local economic conditions unless you are talking about China which the article pointed out that the slow down in the real estate markets happened all about the same time when the Chinese government completed their last round of foreign exchange control measures to keep money inside of China. I suspect that the last global real estate boom was mostly funded by Chinese nationals moving funds out of China... that, for the most part, has stopped.

Therefore, no amount of stress test reduction/removal will now help re-inflate the market as it's been shown time and time again through the various affordability calculations that the market is way too unaffordable for locals. The market will have to adjust to the old reality before all of this craziness happened.
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Oct 7, 2007
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craftsman wrote:
Mar 15th, 2019 8:05 pm
They know what side the bread is buttered on and right now they are seeing that they might not be able to afford that butter!

What I like is that they can't even get their story straight - one minute they are saying that the prices are fine (hence their 'model' price to represent a 'typical' home) since it only dropped 0.6% in the past 6 months, then turning around and producing statistics that show the average sale price has dropped at least 10x more than that!

A news article was published a few days ago which stated that the majority of the formerly hot real estate markets across the globe are now seeing large sales volume and price reductions - ie London, NYC, LA,... that can't be blamed on local economic conditions unless you are talking about China which the article pointed out that the slow down in the real estate markets happened all about the same time when the Chinese government completed their last round of foreign exchange control measures to keep money inside of China. I suspect that the last global real estate boom was mostly funded by Chinese nationals moving funds out of China... that, for the most part, has stopped.

Therefore, no amount of stress test reduction/removal will now help re-inflate the market as it's been shown time and time again through the various affordability calculations that the market is way too unaffordable for locals. The market will have to adjust to the old reality before all of this craziness happened.
In the real world, anything that goes up can also come down. Somehow, the Realty Industrial Complex (RIC) only sees real estate moving in one direction, up. They never even entertain the thought of the prices coming down and, if they do, the prices are quoted as being flat at best, If, over the last 20 years, real estate in Vancouver (and maybe other places worldwide) have increased 10-fold in price, why is it not possible (in the real world) for real estate prices to deflate by 10-fold, or even half of that by 5-fold, especially when wages have not increased hardly at all for the same period. Just saying that math and numbers need logic to make sense.
Deal Guru
Jan 27, 2006
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Vancouver, BC
choclover wrote:
Mar 16th, 2019 12:13 pm
In the real world, anything that goes up can also come down. Somehow, the Realty Industrial Complex (RIC) only sees real estate moving in one direction, up. They never even entertain the thought of the prices coming down and, if they do, the prices are quoted as being flat at best, If, over the last 20 years, real estate in Vancouver (and maybe other places worldwide) have increased 10-fold in price, why is it not possible (in the real world) for real estate prices to deflate by 10-fold, or even half of that by 5-fold, especially when wages have not increased hardly at all for the same period. Just saying that math and numbers need logic to make sense.
Actually, I believe the RIC understands both ups and downs of the market. They know that during the 'up' times, they can create more demand with their standard bag of tricks (ie 'they ain't making any more land' or 'you better get in now', or ' you'll never have a better time to buy'...) on potential buyers and the public at large. They also know that during the 'down' times, they can't create that demand as their standard bag of tricks no longer works for the most part (there's some traction but not as much as in the 'up' markets). As such, they need to keep creating the illusion of either an 'up' market or one that isn't that bad or the downturn is only temporary in order to drum up business.

As for going up 10 fold and down 10 fold, that's not going to happen due to inflation. The best you can hope for is a reversion to the mean with inflation taken into account. Now that's not to say that it can't dip below that mean for a short period of time but anything longer or drastically lower than the mean probably won't happen.
Deal Addict
Apr 10, 2011
1182 posts
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Vancouver
i6s1 wrote:
Mar 15th, 2019 4:48 pm
It's hilarious seeing the Realty Industrial Complex lobbying hard to kill the stress test. What a bunch of dishonest jerks - constantly claiming that the stress test is bad for first time buyers. And it's funny too that they think that would make any difference in this pending real estate and economic collapse. Sorry guys, the Golden Era is over.
Agree with you.

Real Estate Boards lobby government officials to complain that there's "blood on the streets. Bring back the days of easy money."

https://m.huffingtonpost.ca/2019/02/09/ ... _23665668/

Overpriced home sales have dramatically slowed, and so have their 3% Real Estate sales commissions. It's a CRISIS!

The media lately has been reporting the tragedy that "Canadians lost $10B (or whatever) in home equity in 2018".

So, collectively, if Canadian home owners gained $100B in 2017, $140B in 2016, etc., it's the end of the world when their "investment" gain drops a bit in value?

Bought at $500,000. Worth $2.6M in 2017, then $2.4M in 2018. This is a CRISIS that needs the government to help inflate prices again?

The feds kept interest rates artificially too low for too long. Now the feds are stuck. If they return to free market appropriate interest rate levels, the hairdressers that bought $800,000 condos would be in big trouble.
Last edited by RxMills on Mar 17th, 2019 3:24 pm, edited 1 time in total.
Deal Fanatic
Feb 29, 2008
7501 posts
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RxMills wrote:
Mar 17th, 2019 3:04 pm
Agree with you.

Real Estate Boards lobby government officials to complain that there's "blood on the streets. Bring back the days of easy money."

https://m.huffingtonpost.ca/2019/02/09/ ... _23665668/

Overpriced home sales have dramatically slowed, and so have their 3% Real Estate sales commissions. It's a CRISIS!

The media lately has been reporting the tragedy that "Canadians lost $10B (or whatever) in home equity in 2018".

So, collectively, if Canadian home owners gained $100B in 2017, $140B in 2016, etc., it's the end of the world when their "investment" gain drops a bit in value?

Bought at $500,000. Worth $2.6M in 2017, then $2.4M in 2018. This is a CRISIS that needs the government to help inflate prices again?
I see no difference between the cries for the government to inflate or deflate prices artificially. Too much meddling, too much depending on the government to "Do something! Anything!".
Deal Addict
Apr 10, 2011
1182 posts
637 upvotes
Vancouver
JayLove06 wrote:
Mar 17th, 2019 3:20 pm
I see no difference between the cries for the government to inflate or deflate prices artificially. Too much meddling, too much depending on the government to "Do something! Anything!".
You're right, the free market is the best. However, during the big run up of real estate since 2010, the government did intervene by artificially dropping interest rates to near-zero to support businesses (and jobs). Now, of course, they have to keep intervening to forever support their artificial fix with mortgage stress tests, etc.

Politicians should not be controlling interest rates. That control should have been left with economists. But, we're stuck now with perpetual ongoing government tinkering and bandages, all designed to keep government officials re-elected.

Now there are millions more that are barely surviving who owe a very large mortgage debt. They shouldn't have been homeowners to begin with.

But, what choice did they have. City governments approved condo developments over rentals to gain those lucrative propery taxes.
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Feb 9, 2003
17604 posts
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Langley
Any read Garth Turner's latest post?

https://www.greaterfool.ca/2019/03/18/the-noble-goal/


I know it can be hard to follow him because he's repetitive and almost as childish as me... but this entry was unique and interesting. Basically, the banks are looking for extremely high down payments right now on high-end places, even with very high income.

It's a little worrisome for me. I'm hoping to buy a place on this current dip over the next few years. We've saved about $160k for a DP (50k out of our RRSPs plus 110k in TFSA) so we can avoid CMHC fees up to $800000. But if if the banks now want huge DPs for uninsured mortgages, I might have to pay for insurance anyway.

I'm not in the 1% of earners....I don't know if this will just affect the ultra-high end or if it will trickle down to typical SFDs in the burbs.

At least if there is a massive drop, I'll save a lot more than the CMHC fees would be.
Member
Aug 16, 2011
296 posts
161 upvotes
OTTAWA
What's the damage in Vancouver since the peak? Anyone has analysis on that? is it like 20% down like Toronto is for detached... Toronto condos don't seem to be impacted yet but Van ones are down like detached.
Deal Addict
Jan 23, 2016
1032 posts
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Kitchener, ON
i6s1 wrote:
Mar 19th, 2019 12:15 pm
Any read Garth Turner's latest post?

https://www.greaterfool.ca/2019/03/18/the-noble-goal/


I know it can be hard to follow him because he's repetitive and almost as childish as me... but this entry was unique and interesting. Basically, the banks are looking for extremely high down payments right now on high-end places, even with very high income.

It's a little worrisome for me. I'm hoping to buy a place on this current dip over the next few years. We've saved about $160k for a DP (50k out of our RRSPs plus 110k in TFSA) so we can avoid CMHC fees up to $800000. But if if the banks now want huge DPs for uninsured mortgages, I might have to pay for insurance anyway.

I'm not in the 1% of earners....I don't know if this will just affect the ultra-high end or if it will trickle down to typical SFDs in the burbs.

At least if there is a massive drop, I'll save a lot more than the CMHC fees would be.
You need you ask yourself why the banks want the borrower to put so much down. Why could the bank not want to be holding onto loans where they own 80% of the equity in Vancouver? Because they know in a few years time the loan will be 100+% of the property value when they will have to foreclose on it.
Deal Guru
Jan 27, 2006
10516 posts
4155 upvotes
Vancouver, BC
Sparky9087 wrote:
Mar 19th, 2019 12:51 pm
You need you ask yourself why the banks want the borrower to put so much down. Why could the bank not want to be holding onto loans where they own 80% of the equity in Vancouver? Because they know in a few years time the loan will be 100+% of the property value when they will have to foreclose on it.
Yep.... basically, without insurance, they don't want to be holding the bag. I've said it earlier in this thread that banks aren't stupid.

However, I see it as a good thing right now as the banks are predicting further downside risk in the market and are hedging their bets accordingly. So, that should be good for anyone looking for a home in the foreseeable future as the downward pressure continues. Also, it's a vote of confidence for the banks against the short sellers for those who are long on bank stocks.
Deal Guru
Jan 27, 2006
10516 posts
4155 upvotes
Vancouver, BC
Jeremyl007 wrote:
Mar 19th, 2019 12:31 pm
What's the damage in Vancouver since the peak? Anyone has analysis on that? is it like 20% down like Toronto is for detached... Toronto condos don't seem to be impacted yet but Van ones are down like detached.
Depends on who's figures and what they use...

If you go by the average selling price, in Vancouver proper, it has gone from a little over $3 million for a detached house to a bit over $2 million right now and according to the recent near term numbers, the decline is accelerating. The question coming up in the Spring is what will happen to the market when the traditional selling season starts up in the next few weeks -> will sellers rush into the market hoping to get out of Dodge before sundown OR will they try to wait it out for another year? Also, are the buyers listening to the real estate industry and panicking to get into the market OR are they content to wait out the sellers as they sell the damn breaking?
Deal Addict
Jan 23, 2016
1032 posts
251 upvotes
Kitchener, ON
craftsman wrote:
Mar 19th, 2019 1:33 pm
Depends on who's figures and what they use...

If you go by the average selling price, in Vancouver proper, it has gone from a little over $3 million for a detached house to a bit over $2 million right now and according to the recent near term numbers, the decline is accelerating. The question coming up in the Spring is what will happen to the market when the traditional selling season starts up in the next few weeks -> will sellers rush into the market hoping to get out of Dodge before sundown OR will they try to wait it out for another year? Also, are the buyers listening to the real estate industry and panicking to get into the market OR are they content to wait out the sellers as they sell the damn breaking?
People always say “oh it can’t decline much, there are so many people waiting on the sidelines.” Yea, right. Until the market falls 20% with no signs of stopping. Nobody sitting on the sidelines is going to try and catch the falling knife. They have everything to gain by waiting for a bottom so why would they stick their necks out for over leveraged, panicked sellers.
Member
Aug 16, 2011
296 posts
161 upvotes
OTTAWA
I don't like the average price since its skewed to the upside.. medium sales should be more relevant... I still don't see a reason for anyone to get into Vancouver right now... What industry does it actually have... On the pretty hand Edmonton and Calgary are cheap compared to both markets
Deal Guru
Jan 27, 2006
10516 posts
4155 upvotes
Vancouver, BC
Sparky9087 wrote:
Mar 19th, 2019 1:41 pm
People always say “oh it can’t decline much, there are so many people waiting on the sidelines.” Yea, right. Until the market falls 20% with no signs of stopping. Nobody sitting on the sidelines is going to try and catch the falling knife. They have everything to gain by waiting for a bottom so why would they stick their necks out for over leveraged, panicked sellers.
People have listened to the real estate industry before on dips and bid the market back upwards... The 2008/9 market is a prime example. However, I believe that this time is different as the affordability has really taken a hit with the massive increase in the past 10 years as well as the interest rate hikes and reduction in the 'investment' mania for the past decade.

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