The state of the Vancouver real estate market

[baggab]

Originally Posted by Metro-One

Ok, this is how it is going to go, the markets will continue to slide for the next 2 years, around 20%, then they will level out, just as they are beginning to rise a meteorite will slam into the earth, somewhere around Portland, the shock-wave will destroy most of Vancouver but not vaporize it. This will cause the real-estate market to fall around 98% Then, just as the survivors are beginning to re-build, market up 10%, a virus released from the meteor impact (did i mention it hit a secret government laboratory?) will turn people into flesh eating zombies. This will cause the market to drop to 0%.

Honestly i love people who think they can predict the future of the market, how many times have the best economists been wrong in just this last year? Honestly, predicting the weather is more sound than predicting the market months/years in advance.

That's what happens when you think economists are trying to help you make money. They don't pump and dump for no reason.

[johnjimbc]

I've got a better idea, Mrjauk, I'll donate $100 to my favorite charity today and you do the same. That will do the world a lot more good than either of us arguing about the future on a message board.

In the meantime I won't be comparing degrees, which I have, experience, which I have, or analytical capability, which I have in spades. And I won't be shifting the parameters on your behalf. You have said on more than one occasion that you expect a drop of real prices in Vancouver by "at least 50%," and on at least one occasion you've indicated a drop of up to 70%. You've also previously backtracked when I presented data in direct opposition to your contentions about a specific demographic area - Washington DC - so it doesn't surprise me you would want to do the same now with regards to a firm prediction about Vancouver.

For someone who has spent countless hours in an field of exacting calculations and analytical precision, your positions are about as slippery as the water moccasins I grew up around.

The bottom line remains you expect a total collapse of the Vancouver housing market. I don't. I expect modest declines in the near-term and a return to a more historically traditional market (i.e., not a boom, just more in keeping with historical averages) within a year or so.

We shall all find out together, no matter how many more countless hours you devote to your soapbox.

[Powell]

Originally Posted by jlousa

I'll take that bet. If the median price posted by the real estate board in July 2010 is lower then the median price of July 2008 by 50% or more I'll buy everyone a hotdog at a group meet, if I win you'll buy everyone a hotdog.

Are you sure that you will be able to afford all those hotdogs when your Woodwards places are worth $100sq foot?

[cornholio]

Originally Posted by Metro-One

Ok, this is how it is going to go, the markets will continue to slide for the next 2 years, around 20%, then they will level out, just as they are beginning to rise a meteorite will slam into the earth, somewhere around Portland, the shock-wave will destroy most of Vancouver but not vaporize it. This will cause the real-estate market to fall around 98% Then, just as the survivors are beginning to re-build, market up 10%, a virus released from the meteor impact (did i mention it hit a secret government laboratory?) will turn people into flesh eating zombies. This will cause the market to drop to 0%.

Honestly i love people who think they can predict the future of the market, how many times have the best economists been wrong in just this last year? Honestly, predicting the weather is more sound than predicting the market months/years in advance.

Actually predicting market trends is generally quite easy and accurate. Pretty much all economists agreed that this was coming, remember dont listen to the ones working for the banks, governments, etc.
Im not saying prices will drop so and so, im just saying that there will will be negative pressure on price growth.

I like this graph, see that giant bump.



And Jlousa you can disagree with me all you want, in the end we wont see the effects for a very very long time. In my eyes the math is very simple, the concept is also very simple.

[jlousa]

Powell,

Even if my unit was Woodwards was worth -$100sqft I'd be able to afford the hotdogs easier then you would. No need to worry about me.

Cornholio

I've never denied a correction and flattening in fact I was one of the first here to call for it. What I don't agree with is that we will see a decline in prices over the longterm, even the chart you posted shows an increase in population in every single age category, all those people need to live somewhere hence the increase in demand. Whether they are working age or not doesn't affect the demand for housing. My degree was in economics as is a good portion of my work. If our population stops growing then I will agree that we can see a decline in prices longterm, but no one is predicting that. So the only solution is to increase supply, as our boundaries are limited we need to densify even more. If that new supply outpaces demand over the longterm it will lower unit prices, but land will get more and more expensive. The sad truth is Vancouver proper will become unaffordable to won for anyone below upper middle class within our lifetime.

[SpongeG]

it probably sounds new agey but society is shifting and material possessions are going to be less important this all plays into it

[Yume-sama]

Originally Posted by SpongeG

it probably sounds new agey but society is shifting and material possessions are going to be less important this all plays into it

Yeaaah. No.

Maybe for people who couldn't afford them, and shouldn't have been buying them in the first place, which lead to this.

But that's more because nobody will lend them that money for their new big screen TV or SUV, which is also a problem.

[SpongeG]

well yes and those people are going to rexamine their lifestyles and be able to live on less with less

I know i am

[mrjauk]

Originally Posted by johnjimbc

I've got a better idea, Mrjauk, I'll donate $100 to my favorite charity today and you do the same. That will do the world a lot more good than either of us arguing about the future on a message board.

In the meantime I won't be comparing degrees, which I have, experience, which I have, or analytical capability, which I have in spades. And I won't be shifting the parameters on your behalf. You have said on more than one occasion that you expect a drop of real prices in Vancouver by "at least 50%," and on at least one occasion you've indicated a drop of up to 70%. You've also previously backtracked when I presented data in direct opposition to your contentions about a specific demographic area - Washington DC - so it doesn't surprise me you would want to do the same now with regards to a firm prediction about Vancouver.

For someone who has spent countless hours in an field of exacting calculations and analytical precision, your positions are about as slippery as the water moccasins I grew up around.

The bottom line remains you expect a total collapse of the Vancouver housing market. I don't. I expect modest declines in the near-term and a return to a more historically traditional market (i.e., not a boom, just more in keeping with historical averages) within a year or so.

We shall all find out together, no matter how many more countless hours you devote to your soapbox.

I don't remember ever suggesting that prices would drop 70%.

As for backtracking on the DC stats, well I guess we have differing definitions of backtracking. If I remember correctly, you claimed that prices had either not fallen at all in DC, or were down only a X% (where X was a low single-digit number). I claimed that prices in DC had already fallen about 20-some-odd%. I looked at some more data and conceded that they hadn't fallen as much as I had initially claimed, but they had fallen a percentage that was in the high teens.

You know, you and I may agree more than we disagree, but I think one of the fundamental disagreements we have is the extent to which each of us believes that the market of the last 5 years overshot fundamentals (i.e, was untraditional).

I also believe, as do you, that we will get back to the long-term historical average but in order to do so a drop in real prices of about 50% is necessary. In fact, it takes about all of 5 seconds to infer this from a quick perusal of a graph of long-term real estate prices in Vancouver.

[johnjimbc]

Here is the DC data. No high teen drops.

http://gcaarrocks.com/WorkArea/showcontent.aspx?id=5494

http://gcaarrocks.com/WorkArea/showcontent.aspx?id=5496

If you review a large enough geographic area, I fully expect you would see decreases. Loudoun County, an exurb in Northern Virginia, was the fastest growing county a couple of years in a row in the US. My understanding is some of the new housing developments there have suffered, though I also have friends who bought there 4 years ago who appear in good shape with neighbors on their street recently selling at a profit. Closer in suburbs such as Montgomery County in Maryland - home of Bethesda, Md - have similar patterns as DC itself.

Regarding Vancouver, you have repeatedly stated your opinion. You are convinced your 5 second cursory review will prove to be correct. I get that. I really do. I get it from every single post you make. Do you even comment on any other topics on this forum? I don't recall ever seeing any. Maybe you do, but your passion is quite apparent on this topic.

We disagree. I would gladly end this discussion until 2010 - GLADLY! Your diatribes, sometimes including selective graphs from websites like housingbubblecrash.com (I made that one up though it is similar to something you referenced once before) just irritate me. It is as if there can be no other opinion except yours. I just naturally react to anyone who cannot even remotely entertain that they may - just maybe - be incorrect. I rarely argue, but claiming your opinion is the only option . . . well, that'll do it.

One irony on this particular topic is I had a similar disagreement about 4 years ago with a colleague who bought fully into the "booming market will last forever" camp. I'm not a devotee or cheerleader. I believe people need to make the best decisions for themselves and their families. Sometimes that means buying a home, sometimes it means renting. A myriad of factors go into that decision, both financially and emotionally. There are good times to buy and poor times to sell, but if you are buying a home - and not an investment - life events and situations tend to have quite an impact.

I look forward to jlousa's hot dogs next year. In the meantime, I sent $100 to one of my favorite charities today. You still have almost an hour if you held off . Heck, do it tomorrow. As I said before, it will do more good than continuing to argue the future on the internet.

Bug me as you might, do have a good week.

[cornholio]

hey Jlousa lets agree to disagree, in the end we are both right as there is no data to make real long term 50+ year projections. Having said that im going to make a proper little presentation explaining my point, and backing it up best I can It will just take a little while but I think it will be worth it. My entire reasoning is much more complicated then it may appear, i am very confident in it though...maybe too confident but it just makes sense to me.

[cornholio]

Here are just a couple graphs I found that I want to post. Also San Fran is by far the most similar city in the world to Van in term of real estate trends, just that they are usually a couple years ahead of us. Japan seems to have almost hit 1950-60 levels and possibly even sunk bellow them, though that should be just a over correction.

Japan and San Francisco with san Fran pushed back 15 years


Japan, commercial and residential


Vancouver from the late 70's


See that hump for Japan, its directly related to their baby boom and effects of its peak and subsequent decline. Vancouver and San Francisco, and most of NA and Europe is infact at their baby booms peak right now. Oh and Vancouvers geographic constraints already have a effect on prices and also a effect on growth, we see it right now, it cant really have any significant additional effect going in to the future. Vancouver having land constraints isnt a significant issue for prices going in to the future, it just means prices will be a notch higher than other cities but the growth and and falls will remain proportionally the same in the long term. Any changes will be hardly significant in the grand scheme of things.

[Yume-sama]

I really don't think it is fair to compare Japan to Canada. For one, they are actually a major economy that actually has an effect on the World. Canada is not, the World would survive just fine without Canada, and nothing that Canada does really controls our own fate so much as what USA and other countries do. The Japanese market crash DID happen in the same way, though, as banks began giving SUPER risky loans. They have learned from this, and it is now almost impossible to get credit in Japan. People live within their means MUCH MUCH MUCH more than they do in the USA, and even in Canada (which is nowhere near as bad as the USA). Our banks were also not as risky as the USA. Canada is in a much stronger position than the USA to come out of this with minimal damage. Also, looking at Japanese real estate prices, in 1989 in Ginza (Tokyo's elite district) properties were selling for as much as $93,000 PER SQUARE FOOT. That is what I would call unsustainable, and now it has crashed to about 1% of that (Ginza is still at least $900 per square foot). The only reason the Japanese real estate market is declining a little bit now is because the JPY is VERY VERY high, something that is not good for the Country which exports a ton. In Canada, our dollar has gotten very low, which is actually VERY good for our Country, as we are also a major exporter.

So, pretty much, Canada is its own thing. We are in a better position than MANY other countries, and it is primarily consumer confidence that has dwindled thanks in part to sensationalist reporting on the part of the media that has hurt us. Now, are things perfect here? No. But they certainly aren't as bad as many other places in the World, especially MOST states in the USA.

[cornholio]

Originally Posted by Yume-sama

I really don't think it is fair to compare Japan to Canada. For one, they are actually a major economy that actually has an effect on the World. Canada is not, the World would survive just fine without Canada, and nothing that Canada does really controls our own fate so much as what USA and other countries do. The Japanese market crash DID happen in the same way, though, as banks began giving SUPER risky loans. They have learned from this, and it is now almost impossible to get credit in Japan. People live within their means MUCH MUCH MUCH more than they do in the USA, and even in Canada (which is nowhere near as bad as the USA). Our banks were also not as risky as the USA. Canada is in a much stronger position than the USA to come out of this with minimal damage. Also, looking at Japanese real estate prices, in 1989 in Ginza (Tokyo's elite district) properties were selling for as much as $93,000 PER SQUARE FOOT. That is what I would call unsustainable, and now it has crashed to about 1% of that (Ginza is still at least $900 per square foot). The only reason the Japanese real estate market is declining a little bit now is because the JPY is VERY VERY high, something that is not good for the Country which exports a ton. In Canada, our dollar has gotten very low, which is actually VERY good for our Country, as we are also a major exporter.

So, pretty much, Canada is its own thing. We are in a better position than MANY other countries, and it is primarily consumer confidence that has dwindled thanks in part to sensationalist reporting on the part of the media that has hurt us. Now, are things perfect here? No. But they certainly aren't as bad as many other places in the World, especially MOST states in the USA.

You make good points but Tokyo has 30million people, I would expect them to have pretty big elite districts(like any mega city with a giant economy). Regarding banks and financing, you make good point but I dont believe for a second that their the cause. Rather they just allowed the bubble to be bigger then it would of been, but the bubble would of formed regardless. Infact my opinion is that if the percentage of working age people kept growing like it has for a very very long time than the lending practices would of been fine and sustainable, minus the natural correction here and there. Canada should like you say be in a slightly better position, but I just dont think it means much in the grand scheme of things.

edit: just wanted to say that land in the long long term has a limit what it could appreciate too, though we might not have reached the limit right now, but the next opportunity could be a very long time from now...we would all be probably long gone.

[Metro-One]

If you talk to Japanese people they find the concept of buying condos or houses for the point of making money alien and bizarre. In Japan you buy a house or condo to live in, and have no expectations to increase a possible return. Houses and condos in Japan are very similar to that of cars in North America, the older they are the less they are worth, unless they are vintage (historical).

[Yume-sama]

Originally Posted by Metro-One

If you talk to Japanese people they find the concept of buying condos or houses for the point of making money alien and bizarre. In Japan you buy a house or condo to live in, and have no expectations to increase a possible return. Houses and condos in Japan are very similar to that of cars in North America, the older they are the less they are worth, unless they are vintage (historical).

That's just the economy they live in. When I was in Osaka this past Summer I remember reading an article that was going on about how "Real Estate Prices Rise for the First Time in 20 Years!" for the year. Housing is still quite expensive (a lot more than Vancouver), for a lot less, in places like Tokyo, and Osaka... during their boom it would have been outrageous. I think they have found a happy medium now. That said, the majority of Japanese do rent, it is almost unheard of to even think about owning an apartment in the bigger cities. Whole generations of people live together, and they all rent.

I really don't know who owns all of the buildings, but they must be rolling in it.

[twoNeurons]

Originally Posted by Yume-sama

That's just the economy they live in. When I was in Osaka this past Summer I remember reading an article that was going on about how "Real Estate Prices Rise for the First Time in 20 Years!" for the year. Housing is still quite expensive (a lot more than Vancouver), for a lot less, in places like Tokyo, and Osaka... during their boom it would have been outrageous. I think they have found a happy medium now. That said, the majority of Japanese do rent, it is almost unheard of to even think about owning an apartment in the bigger cities. Whole generations of people live together, and they all rent.

I really don't know who owns all of the buildings, but they must be rolling in it.

I dunno know about that. I was in the market to buy a place in Osaka and I found the prices comparable if not lower. Yes, smaller, but much more functional space.

But then again, that's my experience.

Rentals were cheaper than here. This was within 5 minutes of the Midosuji line.

They definitely have a saving culture there... which is kind of funny considering the interest you get at the bank is almost nothing.

One thing that I found in Japan is that they tend to rebuild apartments every few decades.

Also, Ginza is a red herring. You can't really compare it to anything.

[WBC]

If you guys want bearish perspective visit the http://vancouvercondo.info/ blog. The folks there have called for the correction for the last 3 years and they were right. Estimates range anywhere from 30-50% off the peak. Over time they have come up with some very solid arguments against sustainability of prices at 2007/2008 levels. The prime arguments being too low return on investment of rentals and the fact that wast majority of purchases is actually local and that locals do not have income to sustain this. They also maintain that we are just trailing US by few years...So read and enjoy...

[WBC]

Originally Posted by cornholio

Here are just a couple graphs I found that I want to post. Also San Fran is by far the most similar city in the world to Van in term of real estate trends, just that they are usually a couple years ahead of us. Japan seems to have almost hit 1950-60 levels and possibly even sunk bellow them, though that should be just a over correction.

Japan and San Francisco with san Fran pushed back 15 years


Japan, commercial and residential


Vancouver from the late 70's


See that hump for Japan, its directly related to their baby boom and effects of its peak and subsequent decline. Vancouver and San Francisco, and most of NA and Europe is infact at their baby booms peak right now. Oh and Vancouvers geographic constraints already have a effect on prices and also a effect on growth, we see it right now, it cant really have any significant additional effect going in to the future. Vancouver having land constraints isnt a significant issue for prices going in to the future, it just means prices will be a notch higher than other cities but the growth and and falls will remain proportionally the same in the long term. Any changes will be hardly significant in the grand scheme of things.

I am not sure that these graphs are inflation adjusted?

[ssiguy]

Meanwhile back in Canada...........
Vancouver's housing prices have only dropped 11% from it's peak in May/08.
Although in January prices increased 1.5% the trend is definatly be {thank god} down.
1} Immigration both domestically and from internationals is beginning to decline.
2} As many workers from back East have been moving here for work are looking BC's soaring unemplyoment rate and LotusLand is looking less and less the land of milk and honey.
3} Seniors have lost a lot of their savings, pensions, and house values so BC is looking even more expensive all the time. This is most exempified in Kelowna where the seniors moving their has dried up and real estate prices have been plunging. In the last 7 months of 2008 prices have fallen 20% and still picking up speed.
4} Vancouver is so completly out of wack with the ROC that it's relative prices are worse than ever. This is especially true due to Alberta where prices are plunging.
5} Changes in federal regulations came into effect in Nov'08. No more of this standard zero down, 40 year mortgage crap. Now a minimum of 5% downpayment is required and the maximum mortgage ammortization is 35 years. 5% doesn't sound like much but when your first little one bedroom condo costs you $250k that 5% works out to 12.5k. Most buyers in Vancouverites don't have that kind of money in their piggy bank.
6} Credit is drying up and even those people who may technically qualify for a mortgage may no longer get it.
7}Much of Vancouver's house price explosion had much more to do with speculation not population growth. Remember Montreal is growing as fast as Vancouver but their prices are less than one half of Montreal's. This started due to international buyers who viewed their purchases as an investment not a place to live. Those days have come to a screeching halt and won't recovery for 4 to 5 years at the minimum.

In short Vancouver house prices have only just started their decline and will begin to fall and faster thru 2009..............possibly as high as 30%. When the Realty Board of BC expects prices to decline 14% this year you can be damn sure it will drop much more than that.