Days from now will come hard evidence the fling is done. House prices have finally pushed past the point of sustainability. And that noise you are about to hear is moaning from the Lower Mainland – our own dank little subprime rain forest.
It had to happen, of course. No Canadian city can see the average SFH rise to $1 million, especially one where the average income is $83,130, and expect it to last. And all that stuff about the Asian Invasion being responsible for a permanent escalation in real estate values is so much marketing hype manufactured by creative dinks like Cam Good.
He’s the Vancouver marketing guru who’s been playing the supplicant BC media for the fools they are. He hired a helicopter, for example, to fly local Chinese-Canadian real estate agents over a new condo in White Rock, then spun it as a landmark aerial bombardment of Mainland Chinese dollars on the region. That’s exactly the story the TV reporters wrote, from the back of the Air Scare copter.
And days ago the Vancouver Sun ran a column he wrote castigating people for blaming rising prices in places like Richmond and Richmond Hill on the yellow peril – when he’s been the main igniter of conflict, envy and greed.
“If you suffer from real estate impotence, don’t blame Chinese people. Besides, getting all worked up about it will only make it worse. Have a glass of wine. Relax. Stop feeling sorry for yourself and pick up the phone to call a realtor or a mortgage broker, either of whom will be more than happy to show you how easy it can be to get your real estate groove on.”
But actually, you might want to wait. The market’s started to crumble. The Cam copter just ate turf.
These are internal stats (MLS) from the Vancouver Real Estate Board:
The Richmond market, ground zero for China frenzy, has died.
- Listings have exploded. The number has more than doubled since the beginning of March (going from 400 to 850).
- Sales have collapsed. In February, 250 properties sold. In March, sales were 260. In April, it looks like 120 – down 52%.
- Inventory is swelling. In February there were enough homes listed to last 1.5 months. That has suddenly shot up to 7 months.
And even on the west side of Vancouver, where ugly boxes built 40 years ago were overrun during open houses and have been selling for $1.3 million, sales volumes have just plopped by 30%. Across the entire Van area, it looks like sales volumes will be lower in April by 20%. So much for the Spring market.
Says my source, Deep Throb: “I would expect to see Richmond prices fall by 20% by summer. They had a super spike but the sales have now stopped. Vancouver West – still showing effects from lack of inventory and some serious Asian money on the demand side.
“Inventory at end of April should come in approx 10% below last year. We’ll see where this goes but the market is showing some signs of cracks at the fringes and people are tapped out for ability to pay.”
Of course they’re tapped out. It now takes more than 70% of gross household income to carry the average Vancouver property. Across Canada, it’s almost 50%. Factor in rising interest rates (the next Bank of Canada announcements are May 31 and July 19), higher taxes (that happens after May 2nd), an economy drop-kicked by a $1.05 dollar, structural unemployment and flatlined wages, and there are no economic fundamentals supporting the housing market. Only hormones. Media drivel. Marketing dinks. Delusion. Public hysteria. Your idiot father-in-law. And Chinese. It’s over.
And with that, we whisk to Winnipeg, where Jimmy the musician writes:
I’m an affectionate and fairly new reader of your blog. I’m not in a great position to take much of your advice, sadly, but I’d like to offer you (and maybe your readers, who knows) a different perspective on why I rent.
I’m a professional musician. Having just filed my income taxes, I am known to have made roughly $21,000 last year. Okay, so I’m not in house-buying territory in the first place, so the greater part of the Greater Fool blog isn’t of much practical use to me. Except, of course, that I am in house-buying territory. My partner and I pay roughly $900 in rent a month jointly, meaning that I could find myself holding the reins of a $200,000 mortgage if I so chose (according to certain banks), and replace monthly rental fees with monthly interest payments. And in Winnipeg, where I live, you can find a decent piece of real estate for $200,000. I don’t plan to, and I don’t want to. All financial considerations aside, here’s why:
I don’t have to worry one whit about taking care of this place where I live. I don’t have to cut grass, shovel snow, clean eaves, paint the walls, deal with flooded basements, renovate, rewire, call the plumber, fix the windows, or clean up after inconsiderate people’s dogs. I don’t have time for all of that. I’m a musician – my spare time is called for; I have to practice, to write, to run around the city to do my job (and to read blogs). I can’t be bothered to look after a house. My share of $900 / month is well worth the price.
Plus, I’m doing better than the 40% of Canadians (apparently) who have no savings! I couldn’t believe that when I read it. How can I be financially better off than people making five times my income? I manage to put away what amounts to a monthly pittance now, but if I do it long enough (and musicians don’t tend to have a fixed retirement date) will hopefully add up to something where I can continue to live as I do now into my twilight years.
So tell me. How is it that an apartment-dwelling professional musician clearing $21,000 a year is in a better financial situation than 40% of the country? And, honestly, how bad is it that I am?
Let me know if your blog ever needs a theme song.
I’m taking requests.