Cruel April

KISS modified

The intersection of greed and stupidity is a tough place. Katy lives there.

Three years ago the blog dogess emailed me the 1,100 square-foot semi she was renting in the “trendy and gentrified” Mount Pleasant hood of Vancouver went on the market for $900,000. That was outrageous, she said, “but not compared to the ex-hoarders piece of junk down the street selling for $1.1 million.”

Thirty-six months to the day, she was in touch again.

“Anyhooooo, move forward just three year,” says Katy, “and, after having reno’d the kitchen/living room, the place has just sold for DOUBLE the 2013 price, at $1.62million – and that was $300K over asking!

“WTF??????? It’s a 90-yr-old SEMI (as in only HALF of the property in the photo)! Can’t say I blame the owners for taking advantage of the sheeple’s insane panic mentality before things get messy! They literally doubled their money and if they’ve any sense they’ll keep it and run!

“Can you say tulips?!!!!”

So here’s the property:

SEMI

By the way, there was no Asian seller. No Asian buyer. Just a greedy vendor and a stupid purchaser, in collision.

This is worth mentioning since we have two seriously diverging local economies in the nation. Consumer confidence, incomes, job prospects and property values are now stagnant or falling in a majority of cities, from Saint John’s (the oil money is gone), to anywhere in Nova Scotia (or Saskatchewan), Winnipeg, pretty much all of Alberta, anywhere 60 km from King & Bay, Ottawa and all places where stuff used to be dug up, pumped, refined or machined. This is despite the fact mortgage rates are at record lows, and it’s rutting season.

So what’s happening in YVR, and to a far lesser degree in 416, is classic pre-crash behaviour. Prices have spiked insanely and with each spurt higher, they breed more excess. There’s panic buying everywhere, as an entire region (the Lower Mainland has about two million souls) comes to believe families are being “priced out forever.” You need only read the histrionic local media or listen to the cheap radio that city produces to know the Yellow Peril card is played daily, and effectively. People are being forced into buying decisions that were incomprehensible to them two years ago. Those wise enough to sell can name their price.

Housing’s become detached from economic fundamentals, including average incomes, net migration, debt service ratios, household savings, job creation and economic expansion. BC has turned into California, where a disproportionate amount of the GDP became dependent on a single industry (real estate). Eventually the state, the eighth biggest economy in the world (Canada is number 11) ran out of money, paying its bills with IOUs.

Today the average detached house in Van sells for more than $1.7 million. Sales are running 56% above the ten-year average. There is nothing – nothing – that people talk about, other than housing, speculation, flipping, land values, teardowns, mortgages and real estate wealth. It is an obsession, a social disease, a cult mentality that has led to excess beyond anything so far in the Canadian experience. This is the Klondike, Nortel and first sex all rolled together. Nobody can look away.

The search for reasons is academic. Many blame offshore investors, especially the Chinese, but that’s now all mixed up with the huge local Asian population. Others are savaging the real estate industry, assignment clauses, shady brokers and guys in shiny suits, soccer hair and cars with doors that flip up. Of course the cheap money policies of the Bank of Canada have been a big factor, along with parental financing and the fact Vancouver has more in-house rental suites than any other city on the continent.

But the real culprit is speculation. The fear of being priced out has pushed buyers to offer anything in order to own, and with increasingly large debt loads. Nowhere else in Canada is leverage used so massively or cavalierly – because everyone expects real estate values to continue to climb. In their eyes, the foreign money will never stop. Rates will never rise. Buyers will never prevail. Assessments never fall. And government will never cool the market – because it mean wholesale financial slaughter.

Geoff lives rents a condo in New West, thirty minutes from downtown Van. He just sent me this:

“Long time reader of your blog, but it all hit home this afternoon.  Got home around 3, to find a line-up, about 20 people deep, getting onto the elevator.  So many folks piled on, the damn thing broke down.  The reason?  Open house in my building.

“Decent looking place, but what the ad doesn’t tell you is that, rumour has it, the previous owner DIED of a drug overdose in the unit.  There were also about 3 SPCA orders posted to the door for a few months, so I’m guessing the tenants weren’t taking care of the place all that well.

“Based on the number of people here, I’m guessing the apartment will sell well above asking.  If a bidding war on a place someone died in isn’t a sign madness, I’m not sure what is.”

Remember these days. Your kids will want to know what happened before the event.

190 comments ↓

#1 TRUMP on 04.11.16 at 6:42 pm

Always good to hear those who are smart enough to PROFIT AND GET OUT AND STAY OUT!!!

We’ll be LAUGHING at the buyers shortly!

#2 BC Buyer on 04.11.16 at 6:43 pm

I also got in a bidding war for a place where someone died. With such low inventory, I’m sure that estate sales make up a larger than normal percentage of listings.

#3 Brazil ex-pat on 04.11.16 at 6:43 pm

http://www.cnbc.com/2016/04/11/ny-ag-announces-5-billion-settlement-with-goldman-sachs.html

As usual in the United States, not one banker is going to jail.

#4 Adam Smith on 04.11.16 at 6:48 pm

Huh, it is actually kind of tempting to say first when there are zero comments.

Anyway, Garth, what is your opinion on Victoria? Is it going to crumble the same as Vancouver inevitably must or do the prices there make more actual sense?

#5 WallOfWorry on 04.11.16 at 6:49 pm

Another fascinating post about obscene house horniness in Canada Garth! There are a couple of other developments that would merit some consideration and interested in your thoughts. Alcoa kicked off earnings season and the current trend is for corporate earnings to decline at a pace of 8%. And….a good article from The Economist (no zero hedge due here Garth) that outlines some reasons for concern with European banks.

http://www.economist.com/news/leaders/21692879-it-has-been-traumatic-week-european-banks-their-problems-run-deepest-italy-borrowed

#6 Blair Stiver on 04.11.16 at 6:52 pm

First?

#7 Bram on 04.11.16 at 6:53 pm

What does ‘soccer hair’ look like?

#8 Felix on 04.11.16 at 6:54 pm

Cruel April, indeed. I see dogs up there again, Garth. Not good.

At least we had a week off. And one kitty pic. Not bad.

We’ll trust you to limit photos of moronic, slovenly canines to one per week from now on.

And you can trust us not to slash all your upholstery and furniture at night and pee in your closets.

We’re giving you a great deal :)

#9 Farran McMahon on 04.11.16 at 6:54 pm

First!

#10 Freedom First on 04.11.16 at 7:05 pm

The Klondike, Nortel, and first sex. 3 excellent examples of how and why people can make life altering tragic errors in judgement. And yes, leveraged RE. It has caused more people to go bankrupt than everything else, combined, by far- Warren Buffet.

I agree with Warren, but only if you don’t count divorce.

#11 Dan on 04.11.16 at 7:07 pm

First

#12 waiting on the westcoast on 04.11.16 at 7:07 pm

Smart vendor… Not greedy vendor. It’s not the seller’s fault that the buyers are striving to see who can be the greatest fool… ;-)

Wish I could convince my parents to sell while the fools line up!

#13 Move on VREU on 04.11.16 at 7:08 pm

“Housing’s become detached from economic fundamentals, including average incomes, net migration, debt service ratios, household savings, job creation and economic expansion.”

This could be applied to 2007,2008,2009,2010, 2011, 2012, 2013, 2014, 2015 and now 2016 in places like Vancouver. This is the same, same – nothing different.

Economic fundamental analysis is so dated amidst a global economy where foreign capital can go where it pleases.

And there is lots of it fleeing to be parked in the safe comfort of Canada – well, just in two cities really.

Until there is either some regulation of foreign capital, or it dries up, the inflated markets will push families out of the metropoles, which will drive up prices in the burbs, then the hinterlands, and then rinse and repeat.

The next wave of price inflation will hit those places previously untouched by the scourge of foreign capital – simply because of the domino effect.

The Vancouverization of Victoria and the Fraser Valley has already started…

#14 Sheane Wallace on 04.11.16 at 7:09 pm

Let ‘s be straight here:

1. The seller of this piece of junk just made 800 k tax free (assuming primary residence) due to irresponsible government policies and CMHC. As do hundreds of thousands of other flippers.
They have the correct behaviour and are correct taxpayers according to the laws. Or according to their interpretation by bunch of incompetent idiots led by complete figure heads.

2. The new politicos intent to chase professional corporations – doctors, layers, mid income professional for few thousand bucks that are ARGUABLY tax avoidance, e.g. subject to interpretation of the law, not violation of the law.

And the arrogant revenue minister is threatening to penalize the ‘tax dodgers’ with potentially few thousand bucks from maybe 2 % of the investigated cases which will be defended vigorously and will in no way raise 2.6 billions in revenue.

But with projected expense of 800 millions to achieve this ‘sting operation’ which surely will compensate for the 150-200 billions of new debt coming in the next 4-5 years.

No I am thinking when would be the moment when people start exercising their own moral judgement and interpretation of tax laws in defiance of the government’s interpretation and what would be the outcome of that.

Pitchforks coming for the drama teacher’s but?

#15 sanddancer on 04.11.16 at 7:10 pm

The ” crash ” you talk about would have to be at least 50% just to bring us back to price levels of 2 yrs ago !
You were saying 2 years ago prices would correct in the yvr area….i guess at sone point you have to be right …but when ???
Even with these low morgage rates how are people coming even close to qualifying for a morgage on current prices…I’d like an explanation on that. ..thx

Average price have, of course, not doubled in two years. — Garth

#16 Frank on 04.11.16 at 7:13 pm

Vancouver has been detached from fundamentals for a decade. You tell me it can’t continue? Sure, not forever but tell me why it can’t for another 5 years? Remember when house average was a million and Vancity said that by 2020 it would be 4 million and everyone here laughed? Meanwhile less than a year later we’re closing in on two million? Tell me why four million is nuts but the wheels haven’t come off the bus at 2M.

Interest rates aren’t going anywhere. Job growth is fine. Seriously what’s going to stop this? Insane? Morally wrong? Sure, whatever. Economics don’t care about your judgement, they care about precipitating events and then one called for here hasn’t shown up. Meanwhile astute investors have doubled their money in 3 years, maybe they’ll do it again in another 3 while everyone watches

#17 Delia Chow on 04.11.16 at 7:13 pm

I hope the idiots have that have these homes in 30 years from now can pay $100,000 net after taxes, $140,000 to $145,000 a year gross income just for yearly property taxes, yearly home insurance, yearly repairs,maintenance, yearly electricity, year home heating and water expenses.

Remember, you these debt morons and most Canadians have just every day expenses will have to pay for food, car payments, car insurance, car repairs, car maintenance and other expenses.

This is not even mentioning the monthly mortgage payments in 30 years from now, YIKES!

People are going to be wiped out even if houses double in value in 25 to 30 years as CIBC made a report back many years ago.

#18 Boo radley on 04.11.16 at 7:15 pm

First

#19 For those about to flop... on 04.11.16 at 7:15 pm

There’s panic buying everywhere, as an entire region (the Lower Mainland has about two million souls) comes to believe families are being “priced out forever.”

//////////////////////////////////

The population might be 2 Million but I’m starting to wonder how many of us have a soul.

Every time I think about moving I remind myself that this is one of the few areas of town that people don’t run around with dollar signs in their eyes…

M41BC

#20 Frank on 04.11.16 at 7:18 pm

I consideres buying 18 months ago in YVR but didn’t becasue of bear talk. Now I went to bid on a townhouse I could have bought back then only to be outbid by $300K. Even with a 30% crash I still should have bought. I’m priced out. It’s not a realtor slogan, it’s a reality of living here. I’m moving in 2 years from a city I love because I didnt buy 18 months ago.

Just rent you say? Need more space so I have to leave my $1600 1 BR, it’s only that much due to rent control. What does another bedroom cost in my area now to rent? $2800. If I bought 18 months ago I would be paying $2400/month.

#21 BS on 04.11.16 at 7:20 pm

By the way, there was no Asian seller. No Asian buyer. Just a greedy vendor and a stupid purchaser, in collision.

To be fair, the vendors are doing what they should right now. Selling.

The word stupid is being too nice to the buyer. $1.6 million ($300K over asking) for an 1100 square foot dump in East Van. Like I said yesterday, an 80% correction would still leave things overpriced in YVR. Anyone who still holds property in YVR and doesn’t take this gift before the inevitable rush to the exits is a fool.

#22 Sheane Wallace on 04.11.16 at 7:20 pm

#6 Sheane Wallace

GT, Just a question:

Would it be morally just to calculate the difference between market interest rates (4-6 %) and the rates BOC and the banks ‘generously’ give you (0) on your so called ‘deposit’ (in reality unsecured credit to the bank) for you saved money and arbitrarily submit this as proposed tax deduction on you taxes when filing annual return?

Otherwise this is a plain theft!

#23 Brian Ripley on 04.11.16 at 7:20 pm

I actually saw the pictured “90-yr-old SEMI” at an open house a couple of weeks ago. The place was “fixed” up by what looked like a “handyman”. To give you an idea of what the workmanship was like… the kitchen “renovation” included kitchen counter tops that were painted and covered with clear acrylic.

There were a lot of Caucasians tramping through the open house.

If my attempt at counting rentals available each month in the 6 biggest Canadian cities is reasonable, and there is evidence that my totals err more on the under-count side, then renting is a much better “solution” to Vancouver’s housing CRISIS for now.

Rental Chart: http://www.chpc.biz/6-canadian-metros.html#Rentals

Although if the mania persists, we will soon be seeing tents for rent in people’s backyards as there are in San Francisco.

On my morning Vancouver walk I can regularly identify a few people living in their mini-vans.

Hey people if you want this madness to stop then stop bidding real estate values higher… let the next fool have it until we finally run out of them.

#24 hope & ruin on 04.11.16 at 7:21 pm

I’ll tell my kids that I was arguing and making fun of people on a blog for the year leading up to it.

Then they’ll know I was cool.

Then they will ask me “what’s a blog?”. Then I’ll curse that the young-ins know nothing. Then I will tell them about Garth and explain that in times before robot-advisors I had to manually re-balance my portfolio. Then they will ask me what a robot is and I’ll explain that the entity that cleans the kitchen and house “Maria” would be an example of a ‘robot’ before they became ubiquitous. Then I’ll try and explain floppy, mark, smoking man and a nectonite. And then after all this I expect they will have me committed. It’ll be an interesting day.

#25 jay on 04.11.16 at 7:23 pm

Garth,this is what the government wants.People are just responding to 2.5% 5 year mortgages ,increased child benefit etc etc… I haven’t heard the finance minister warning about a real estate bubble .

#26 dong chow on 04.11.16 at 7:28 pm

DELETED

#27 gladiator on 04.11.16 at 7:28 pm

Garth, I completely agree that RE markets in the 2 cities is not even crazy – it is beyond bizarre. It didn’t make sense years ago and now it is downright stoopid.
But. As I reported here about my conversation with a very good commercial real estate broker his weekend – a guy who had no interest in selling me something and who shared his honest opinion – these two markets still have a long way to go and even though this is anekdotal evidence, the culprit is foreign money being parked in the nice quiet country with wide-open gates to money from outside. I do agree that many locals are riding this wave, but if you look at average family incomes and average dwelling prices, the banks should have stopped giving mortgages long time ago. Where is the money coming from? Simple: foreign money is pushing the prices up and locals move up by plopping any equity they have from their previous dwelling into the new one. I have tons of friends who did just that.
Anyway, me being a huge real estate bear and agreeing with what you, the Economist, the IMF and others who say that RE in Canada is in a big bubble, I freaked out and felt like an ass for not buying something a couple of years ago. I had very serious thoughts about buying something now, but after cooling down and running some numbers I decided that I will forget about it for now. Because I would have to downgrade severely my family’s lifestyle, kids’ activities, forget about vacations etc.
So there, a RE bear like me freaking out. This may be the market top, but what the people in the trenches say, this if far from over.

#28 tundra pete on 04.11.16 at 7:29 pm

These are sound decisions based on solid evidence. “They aren’t making anymore land, I’m tired of paying my landlords maintenance bills, I don’t want to throw away my money on rent, I could get priced out of the market, real estate is an investment, the bank said it’s the right time to buy, houses always go up in value, my mom said she could help me with the downpayment yada, yada, yada.

Its no coincidence there is no financial literacy taught in school cirriculum.

#29 For those about to flop... on 04.11.16 at 7:29 pm

#7 Bram on 04.11.16 at 6:53 pm
What does ‘soccer hair’ look like?

////////////////////////////////////////

Bram,check this dude out …when I think of soccer hair I think of the Colombian Carlos Valderrama.

http://www.taringa.net/post/deportes/18451296/Valderrama-james-es-mejor-que-Messi-y-chicharito.html

#30 Lulu on 04.11.16 at 7:30 pm

Look at HK, bubble had burst and not many buyers rush in because every one try to time the bottom and the investors not yet start to dump the inventory, watch when the states raise it’s rate again later this year or as early as April, more investors will dump their apartment and bigger price drop will happen, it will be the same here in Canada when the bubble burst, all of us will try to buy it at the bottom price and when is the bottom? no one knows and the economy will be dragging along and it won’t be pretty!

#31 ROR question on 04.11.16 at 7:30 pm

Hi Garth when you quote a ROR of around 7% (for your balanced porfolio suggestion) is that before or after fees and inflation have eaten away at the return?

#32 IKnow on 04.11.16 at 7:31 pm

Vancouver caught the Hong Kong flu.
What’s happening here now is just very mundane over there.
Only start to panic should average house price reaches $200 a square foot; and even that is just the price for an average flat (strata title) over on the other side of the Pacific rim.

#33 mike in kelowna on 04.11.16 at 7:32 pm

So, what do you think boss, pick up a bit of that yellow stuff now just in case you and the rest of mainstream experts got it wrong? If memory serves me, there was a time last decade you recommended a bit in a balanced portfolio..

#34 IKnow on 04.11.16 at 7:33 pm

I mean $2000 CAD a square foot

#35 Ace Goodheart on 04.11.16 at 7:38 pm

Assuming you’re right, Garth, how do you suggest one goes about shorting this market?

I watched it done brilliantly by a pair of folks in the USA, just prior to the crash, who were purchasing on the wrong side of the default swaps that were holding the whole shaky apparatus together.

Canadians don’t seem to be financing their mortgages that way.

Anyone know of a quick and dirty way of shorting the Canadian housing market?

#36 Chaddywack on 04.11.16 at 7:38 pm

A guy at my work just bought his 4th house this year. (He’s Asian, but born in East Van–a lot of people mix him up as a foreign investor at open houses apparently from what he tells me!) anyway he mortgaged his house in West Van worth about $3M to buy 2 houses earlier this year, then a third, now a fourth!!! Yes he has a ton of equity in the fully paid off West Van house, but wow.

All I can say is I hope he does well or his retirement in 3 years that he’s planning may not go so well.

#37 the Jaguar on 04.11.16 at 7:47 pm

Gentle reminder, Garth. You did just use the word “crash”. What I wonder about is what will happen with the houses people walk away from, presumably to declare bankruptcy. The ones with mortgages, which must be most if indeed it is the locals who are responsible for all this mayhem. How does a bank recover from the “crash” when they are left holding the bag? Don’t imagine there will be buyers lined up to buy houses at prices sufficient to pay out the existing financing on these soon to be white elephants in the room. Care to speculate?

#38 Delia Chow on 04.11.16 at 7:48 pm

To Sanddancer

Yes, but when Garth is right and Canadian housing prices gets screwed, it will last for decade or longer.

Don’t think that Canada can’t or will not end up like a Japanese economic, real estate, stock markets malaise.

#39 Prairieboy43 on 04.11.16 at 7:53 pm

Neighbors home caught fire last night. The Fire department did and excellent job. The boys ripped the roof up, then utilized ladder trucks which dropped H2O into the hole. About 3-4 hrs later fire was contained. Just Charcoal inside. My neighbors are sad, but grateful, no one was hurt. Need to start again.
Ordered a couple more fire extinguishers. A couple more smoke detectors. Checked my insurance.
PB43

#40 saskatoon on 04.11.16 at 7:53 pm

“the event”.

hehe.

#41 rainclouds on 04.11.16 at 7:55 pm

Friends and acquaintances are aware I bailed on Van RE and invested Late 2012. Starting to get inquiries from the 50 something homeowners wanting to retire. “do I have regrets. NO”!

Of course that is more than counterbalanced by VSE like feeding frenzy on the other side of the ledger.

Getting Interesting………….

#42 cto on 04.11.16 at 7:59 pm

Garth
Why are our leaders in charge of finance letting these bubble economics taking place???
Ever since prime rate dropped below 5% 15 years ago we have been getting one bubble after another. What have these supposedly educated people leaned. Seems nothing to me…
Time to put a monkies in our central banks…

#43 Chris on 04.11.16 at 8:08 pm

The people I ran into at open houses are still mostly people that need a place to live. That is true in my neighborhood at least. So the demand is there and they are pushed east to my neighborhood from where they wanted to buy a few years ago because of the price point I guess. It is a lot of debt to take on for young people but I guess they will just have to make do. The east region is booming now. Neglected before and now finally getting people’s attention. Once this area is fully developed. I think GTA is done. Talk about an hour of commute each way. It is insane. The only way to escape the GTA and Vancouver crazy housing price is to escape the GTA and Vancouver, or rent, but forever? Smart people should be going to Ottawa or other places to search for a better standard of living.

#44 james on 04.11.16 at 8:09 pm

#36 Chaddywack

Many years ago I had a great landlord in the Dunbar area. The guy was pulling down maybe 45k as a professional musician, but managed to get a mortgage on a house on the west side. Filling it with renters, he managed to get leverage on it to get down payments on 4 more homes.

He said it was his ‘retirement plan’. If he held those place until today, he is worth 12-15 million (minus taxes).

White guy too, from the USA.

And that is the problem. Cheap credit allows people to take on massive leverage. If it works out, you look like a champ. If it fails, well… it is CMHC insurance time.

A society that sets up incentives such that people sink money into real estate speculation in order to get wealth is in REAL trouble. Real wealth should come from being productive. That is, producing things. New businesses, R+D, finding efficiencies, etc.

Canada is a nation of natural resource extractors (now in trouble) and consumers. There’s not much else.

#45 steerage steward on 04.11.16 at 8:12 pm

Dying alone at home is more common then people think. My neighbor in an apartment died and wasn’t found for several days. I opened the door one day to find a cop sitting in a chair in the hallway, and asked what was going on, she told me. Asked if the police wanted to question me, if I heard anything etc. They said no, this is so common they don’t even bother disturbing the neighbors. If you live in an apartment building over 30 years old chances are a few people have died in the place.

A seller is not required to disclose stigmatized property issues in BC, and can even refuse to answer direct questions about any issues. http://www.recbc.ca/psm/stigmatized-properties/

#46 MarketInquisitor on 04.11.16 at 8:15 pm

Check out my latest update on rate reset pref shares, ZPR.TO.

https://marketinquisitor.com/2016/04/10/zpr-to-etf-update/#more-968

I have made a handsome return of ~16% with dividends since January.

Here is the original post I wrote and shared in this blog about 2 months ago:

https://marketinquisitor.com/2016/01/30/bullish-on-preferred-shares-zpr-to/#more-165

The product is currently fairly valued vs. the 5-year Canadian bond yield, but if you don’t have any in your portfolio and believe rates will be higher in a few years than now, it is still a good time to buy.

If you like to wait, there may be another opportunity to buy around ~$9.5 if you already have RR exposure.

#47 For those about to flop... on 04.11.16 at 8:16 pm

#24 hope & ruin on 04.11.16 at 7:21 pm
I’ll tell my kids that I was arguing and making fun of people on a blog for the year leading up to it.

Then they’ll know I was cool.

Then they will ask me “what’s a blog?”. Then I’ll curse that the young-ins know nothing. Then I will tell them about Garth and explain that in times before robot-advisors I had to manually re-balance my portfolio. Then they will ask me what a robot is and I’ll explain that the entity that cleans the kitchen and house “Maria” would be an example of a ‘robot’ before they became ubiquitous. Then I’ll try and explain floppy, mark, smoking man and a nectonite. And then after all this I expect they will have me committed. It’ll be an interesting day.

/////////////////////////////////

And here I was thinking I was the ” normal” one of the three people mentioned.

One persons normal is another persons crazy I guess…

M41BC

#48 Linda on 04.11.16 at 8:18 pm

Garth, you can warn all you want but – the tide is against you. The bubble/gold rush/tulip speculation madness is ON & until it explodes with the resultant carnage nothing can be done. Then there will be endless articles/books/thesis regarding the crazy behavior & why people lost their collective marbles. Humans are more like lemmings than most will admit.

#49 For those about to flop... on 04.11.16 at 8:20 pm

Not too sure why the NDP are so obsessed with the Leaf Manifesto….you know the one where people are trying to work out why the Maple Leafs wasted 50Million on Mike Babcock…

M41BC

#50 Nemesis on 04.11.16 at 8:21 pm

“People are being forced into buying decisions that were incomprehensible to them two years ago.” – HonGT

#”I’veGotASurpriseForYou!”… or… #ModernTimes:”I’veFoundAHome!”…

https://youtu.be/azrmZpNDMKY

[NoteToGT: It never ceases to amaze me – how often the tropes of classic cinema can be used to illustrate the current mania… I digress.]

#51 Mark on 04.11.16 at 8:24 pm

Garth, You think Poloz will lean Dovish on Wednesday and talk down the loonie? It’s been on a tear lately. Perhaps too much for the BoC’s liking.

What do u see the usd.cad at by year end?

#52 family beagle on 04.11.16 at 8:24 pm

#7 Bram on 04.11.16 at 6:53 pm
What does ‘soccer hair’ look like?

….

Like you run, kick, and score.

#53 Bottoms_Up on 04.11.16 at 8:24 pm

Another sign the top is in or close, saw on CHCH a report that the average Hamilton 2-story goes for over $430,000….remember this is a place where bikers own the main drag and the two top industries have collapsed (steel and brewing).

#54 Dave on 04.11.16 at 8:25 pm


But the real culprit is speculation. The fear of being priced out has pushed buyers to offer anything in order to own, and with increasingly large debt loads. Nowhere else in Canada is leverage used so massively or cavalierly – because everyone expects real estate values to continue to climb. In their eyes, the foreign money will never stop. ”

So because you deny foreign influence in the Vancouver market, then I guess those who live in Vancouver are innately more prone to speculation than anywhere else in Canada? Is it because of the excessive rain here?

I do not deny a foreign influence, but it is the locals who do over nine trades in 10 and are responsible for the market’s advance. The local culture is now decidedly speculative, and inherently dangerous. — Garth

#55 Vic Girl on 04.11.16 at 8:37 pm

Garth, if you believe the current hyper price war activity in Vancouver (which has infected Victoria where I live) is classic pre-correction symptom, or a blow-off top, then what is the trigger that will cause this insanity to stop? Until there’s a major financial catastrophe that forces banks to stop the lending, it’s hard to see an end in sight. What’s the trigger going to be?

#56 juno on 04.11.16 at 8:41 pm

The buyers should of bid 16 trillion dollars. After all housing can never go down, Can it?

#57 Doug t on 04.11.16 at 8:42 pm

Love it list it Bitchez lmfao

#58 Vundo on 04.11.16 at 8:43 pm

Meanwhile, in oil country:
http://business.financialpost.com/news/energy/oil-bust-leaves-energy-industry-real-estate-sector-locked-in-battle-over-empty-oilfield-worker-camps

#59 Kenchie on 04.11.16 at 8:43 pm

#7 Bram on 04.11.16 at 6:53 pm
“What does ‘soccer hair’ look like?”

Lionel Messi circa 2007-8

#60 Naturally on 04.11.16 at 8:50 pm

Are interest only mortgages a possibility? Why wouldn’t the banks introduce interest only mortgages as a means of making housing ‘affordable?’

#61 BoBo on 04.11.16 at 8:55 pm

I live in a small retirement town east to the big smoke and thought we were too far away to have these crazy biding wars and price increases … I guess not. I was at friends house yesterday and his basement dweller 28 year old,part time employed daughter blurted out she had put an offer on a house. She was waiting to hear from the realtor when I was there. The realtor did call to but to inform her there was another bid. So my friends daughter asked us what to do,, then quickly decided to up her bid to full price. An hour later she gets the call the place is hers. I ask her how much she saved to put down,, 5 % she says that’s all people my age can save up. You know you have to pay cmhc fees I said She said her broker told me they would look after all that. What interest rate are you getting I asked ? not sure she said !! But I am pre approved Why did you buy the house? Well if I don’t get one now I wont be able to afford one soon. I have sold 2 of my properties this year, hoping this crazy stuff lasts till next year and I can unload a couple more.

#62 BOOM! on 04.11.16 at 8:59 pm

HA!! I NEVER thought I would again buy real estate, but….

Our little village has ended up with the lots from a local developer who went bust, in the great USA real estate unwind from 2008 onward. The village is now selling the remaining fully improved lots at $7,500 each or 2 lots for $15,000 These are like 110 ft by 180 ft lots and were originally offered, and sold for $29,000 to $42,900.
I will probably buy two, cash (most from my stock market earnings thus far in 2016). While I have no immediate plans for them, the ones I want front a bike path, an old abandoned RR right-of-way, decent views.
Our home is nearly 20 years old now, we could sell this, and build fresh. Much to say about new mechanicals, and appliances. Besides a new triple garage with water would be a great addition! That Caddy isn’t getting any younger.

#63 BOOM! on 04.11.16 at 9:00 pm

oops two lots for $14,000….

#64 Chris in Nanaimo on 04.11.16 at 9:02 pm

Well looks like we have the Vancouver ’empty home’ syndrome in Nanaimo.

Chatting to a colleague today over coffee. Lives in the posh part of Nanaimo (yes there is a posh part). House opposite him is empty, owned by a couple from mainland China, their son show up an mows the lawn now and again. Also said colleague has had both homes on either side of him sell in the last month, both to buyers of Asian descent…(i.e. Can’t speak English). Remains to be seen if they actually move in…..

Apparently average time to sell in Nanaimo is 12 days….seems pretty quick….wonder if we’re seeing some sort of spillover from Vancouver starting?

Also as a side…. coming through YVR International arrivals last week I noticed all offical signage is now in 3 languages, guess what the 3rd language is…..is that the same at Pearson?

#65 "real culprit is speculation" on 04.11.16 at 9:04 pm

“But the real culprit is speculation. Greedy vendor.”

wtf is a “greedy vendor”? Speculation is a “culprit”?

This is the true nature of Capitalism Garth.
Comes with booms and busts.
This is the free market that balances itself.

I guess a risk free, 6% a average return balanced portfolio is Capitalism for you.

But that looks more like centrally planned socialism. Steady, middle of the road, boring, faceless, average for all.

You will learn, son, that controlling risk is ultimately more important than chasing returns. — Garth

#66 45north on 04.11.16 at 9:13 pm

It is an obsession, a social disease, a cult mentality that has led to excess beyond anything so far in the Canadian experience.

prices in parts of Vancouver are going up 50% (July 2015 to July 2016 ). A crash is inevitable. There has never been anything like this.

Justin Trudeau cannot afford an outright crash: banks taking possession, GVRD tax collections running short, social disruption.

Just as a point of reference, I listened to CBC radio today about the NDP convention in Edmonton. The point is economic hardship is undermining the NDP – making it seem ridiculous, advocating policies contrary to the interest of people who are out-of-work, for that matter people who are still working.

this is Justin Trudeau’s test – what’s he going to do – hope that the Vancouver market will remain suspended in the air for the next four years? He needs to raise interest rates and tighten CMHC standards. Damned if he does, damned if he doesn’t.

#67 neo on 04.11.16 at 9:14 pm

Garth,

I thought you might like this real estate agent nugget from the little town of Milton message board. You can feel the frenzy…

That’s right, things are VERY interesting right now for sellers.

We listed it at $549,900, exposed it like crazy over the 2 days before and the first 24 hrs, and we got 27 showings in 3 days, a bully offer before offer night, and following all protocol, we turned that bully offer into 4 offers, and ended up selling it for a sliver over the 600k mark. 50k over asking… Sellers are happy, and the buyers are ECSTATIC they won the bidding. They came into the house afterwards with their family, and everyone was so happy, which is a great ending.

It is a rare market where your are (a) GUARANTEED a certain sale price without a doubt, and (b) handed a free lottery ticket to potentially get an extra $20k, 30k or more above that guaranteed sale price. Don’t be shy to ask me what those numbers would be for your own home.

We will be looking back at some point saying, “Remember when…” – Sellers, you are in complete control right now, so do it once, and do it right! It’s all about maximum exposure as fast as possible right now :)

#68 SydCixel on 04.11.16 at 9:17 pm

Besides the insane residential real estate practices of the public, there’s a problem also in commercial real estate industry in 905. Massive warehouses are being built at a rapid rate in the Mississauga and Milton, ON areas. Watch that glut hurt more than a few investors in the near future.

#69 neo on 04.11.16 at 9:19 pm

That was for a cookie cutter semi detached house by the way.

#70 Victor on 04.11.16 at 9:27 pm

Living in Van, most of people in my circle thinks it will go up & up as they believe mainland rich chinese who migrated their wife and kids here, local real estate agents and local governments are working together as a team to keep the RE up as long as it takes. To a certain extent, it has been appearing that way for the whole decade.

#71 Kristen on 04.11.16 at 9:31 pm

Garth are you really not going to talk about the Globe and Mail article? An agency with 450 agents gets busted and your mute? This is the biggest RE story of the year!
http://www.theglobeandmail.com/news/investigations/inside-a-fast-growing-bc-firm-that-has-home-sellers-crying-foul/article29578417/

A real estate company is unethical and you think that’s news? Get out more. — Garth

#72 John on 04.11.16 at 9:33 pm

So for everyone watching this play out, with jaws dropped… wonder how this will impact assessed value for property taxes.??…….. other than marching ever upwards at a faster and faster rate. Even if one just sits and watches, tax hikes wait for no one………… Seems to me no one is exempt from impact. Maybe Wynne can get a loan from the City of Vancouver tax revenue kitty…

#73 Charlene Geddes on 04.11.16 at 9:35 pm

“Trendy and Gentrified Mt Pleasent”? Excuse while I puke. This is an active hookers stroll and a freakin’ rodeo of Johns circling the block and pimps skulking from gravel lanes day and night.

#74 Ponzius Pilatus on 04.11.16 at 9:47 pm

#35 Ace Goodheart on 04.11.16 at 7:38 pm
Assuming you’re right, Garth, how do you suggest one goes about shorting this market?

Anyone know of a quick and dirty way of shorting the Canadian housing market?
—————–
Keep on renting, and when this thing blows, go crazy.

#75 Doug in London on 04.11.16 at 9:47 pm

A real estate bubble in Toronto? there was an article in Saturday’s Globe and Mail about a real estate bubble in Toronto that burst in 1898. That bursting caused a lot of financial hardship for many people, probably those who bought at or near the top. Could it happen again in Toronto, or Vancouver for that matter? Of course not, it really is different this time! If you believe that, could I interest you in buying some premium priced Nortel or Enron shares?

#76 Charlene Geddes on 04.11.16 at 9:54 pm

#46 MI…suspicious speculation? Re: ZPR

“I have made a handsome return of ~16% with dividends since January.

You can only have made the full 16% if you had bought an entire position on the low of Dec 21, 2015 when the stock hit $8.49. January numbers are ‘quite different’. You obviously took the “52 week low” as reported and extrapolated that into your ‘expert investor’ fantasy.

But on the subject of preferred shares, yes, I agree with Garth that they have a nice upside given the fundamentals. I am not buying the index but rather beaten up issues that show that a ‘catch up phase’ might make for some very juicy returns…to each their own.

#77 Balrog on 04.11.16 at 9:59 pm

Sigh. I’m now a made blog dog.

When I came here few years ago, I don’t understand all these terms and acronyms garth is saying.

Now, was shock that I understand it and never realized it when reading…. t2, yvr,416, dogess!

Frightening.

#78 Observer on 04.11.16 at 10:03 pm

Where’s Poloz?
Sitting on his backside, letting this happen….

#79 Al on 04.11.16 at 10:06 pm

Greedy Vendors and stupid buyers but financed by taxpayer insured mortgages (aka CMHC Insured mortgages)

#80 Island Girl on 04.11.16 at 10:15 pm

The insanity really has spilled onto VI from Vancouver. The house next door to us just sold for $339 and it’s one bedroom smaller and about 300 sq ft total smaller, although it is 10 years newer.

But up the street another house, only 2 years younger than ours, and a lot 1/3 the size of ours, with one less bedroom, but a shinier kitchen and newer floors just sold for $100,000 more than the one we bought last May. And it was 300 sq ft smaller too. Hubby joked that we could sell now and make a quick $100000 except I don’t really want to move, at least I got in before things really went nutso. You might not think $100000 is a lot, but when you go from $285 to $385 that’s almost a 35% increase in one year.

#81 the greater stool.ca on 04.11.16 at 10:17 pm

TRUMP on 04.11.16 at 6:42 pm
Always good to hear those who are smart enough to PROFIT AND GET OUT AND STAY OUT!!!

We’ll be LAUGHING at the buyers shortly!

I’ve been reading comments like these on this blog for 8 years now and the buyers have been laughing at me while they make money like it’s going out of style. Is this really gonna be the year shit his the fan? I need to start telling people- I told you so! ….unlike the guy from the “big short” I won’t be gracious about it.

#82 Toronto Dweller on 04.11.16 at 10:19 pm

If it’s not the peak then what is?

#83 William of the North on 04.11.16 at 10:20 pm

What about the classical definition of Inflation:

Inflation is not defined as rising prices; this is the long-run result of inflation in the quantity of money and bank credit. Common jargon confuses the effect for the cause.

Anyway here is an article that may help. https://www.mises.ca/an-austrian-take-on-inflation/

The world is in a global experiment of printing up electronic money, credit expansion, and solving the debt problem with… an even bigger pile of debt. So you can predict prices will rise, but not so much which asset classes will be ‘inflated’. I’m guessing the hopes were to re-inflate the stock prices, but there are always unintended consequences.

“We can ignore reality, but we cannot ignore the consequences of ignoring reality.”

#84 Bill Salem on 04.11.16 at 10:22 pm

Would adding a bit of Gold Bullion be a good way of controlling one’s risk in a portfolio? Just a little bit more than just the TSX? In a safe, diversified ETF? Just to smooth out the edges a bit? For the long term in mind. Thanks!

#85 Gregor Samsa on 04.11.16 at 10:28 pm

>Where’s Poloz?

Poloz was a Harper puppet – only animated when the master was moving the strings. With the master gone, the puppet lies lifeless on the floor. He’s likely waiting for Trudeau to tell him what to do. Trudeau in turn is waiting for Poloz to tell him what to do.

This is actually a good thing. The more this thing blows up out of control, the more the chances are of an actual correction back to reality.

#86 just some random guy on 04.11.16 at 10:32 pm

So how do WE push this over the edge and precipitate the crash? Let’s get it done already.

#87 Derek R on 04.11.16 at 10:33 pm

#77 Balrog on 04.11.16 at 9:59 pm wrote:
Sigh. I’m now a made blog dog.

When I came here few years ago, I don’t understand all these terms and acronyms garth is saying.

Now, was shock that I understand it and never realized it when reading…. t2, yvr,416, dogess!

Frightening.

Creeps up on you, eh?

I’ve been a bit remiss posting the GarthFAQ lately. But for those who are new to the blog and would appreciate a quick rundown on the blog jargon, here it is: The GarthFAQ

#88 White Crock BC on 04.11.16 at 10:39 pm

the greater stool.ca on 04.11.16 at 10:17 pm

I need to start telling people- I told you so! …

————————————————

Why do you need to tell them that?

Some kind of Schadenfreude thing?

#89 conan on 04.11.16 at 10:40 pm

Re: #35 Ace Goodheart on 04.11.16 at 7:38 pm

Quick and dirty you say?

Short: Home Capital Group , Canadian Western Bank, Genworth Mi Canada.

Beware though…… people have been doing this for last few years. It is not for the faint of heart.

Banks and insurers all have exposure to residential RE. The three I mentioned should move the most though.

#90 westsider on 04.11.16 at 10:41 pm

Got an e-mail from my California landlord last Tuesday telling us that he had sold our house. The next day the new owner came over with a Chinese realtor from Beijing. He flipped the house in a couple of days for a cool $500,00, as did our neighbour on the left. Went out to Maple Ridge and Mission on Sunday to see properties. Everything is sold above asking!!! IN MAPLE RIDGE!!!PLEASE!!!????absolute tiny junk houses!!
We can’t afford anything within driving distance of “the Couv”. Ben here 50 years. This is crazy!!!!!!

#91 TCContrarian on 04.11.16 at 10:43 pm

“It is an obsession, a social disease, a cult mentality that has led to excess beyond anything so far in the Canadian experience. This is the Klondike, Nortel and first sex all rolled together. Nobody can look away.” -GT

This is almost…poetic! And that’s why I keep coming back for more.

#92 Nobody on 04.11.16 at 10:49 pm

I bought 10 months ago in Vancouver. Just sold for 325k over and above what I paid (accounting for all expenses).

I’m lucky I don’t have to buy in right away but what if you are wrong Garth? Looked (for fun) at single homes today and nothing in ALL of Vancouver under 1.8 m that is liveable. Heck there aren’t any 3 bedrooms under a million that are liveable (condos/townhomes you name it). It’s the definition of crazy to me but this market has been out of control for a long time. Hong Kong isn’t going down. Singapore also (on a SW footage basis) way higher than Vancouver. Is it possible these prices are here to stay?

Speculation. You prove the point. It will not end well. — Garth

#93 Bob the Builder on 04.11.16 at 10:55 pm

I don’t get how in Vancouver you can take $150,000 worth of building materials from Home Depot and sell it for $1.6 million, especially when it’s 90 years old! When you are dealing with a 90 year old wood house the proper thing to do is bring in a hoe and a dump truck and start over, which means the lot is worth even more! You have to include the cost of removing the junk house when arriving at the value of the land.

#94 Sell now, make a million...then what? on 04.11.16 at 10:56 pm

http://www.news1130.com/2015/04/01/investor-immigrants-using-quebec-as-back-door-to-vancouver/

And we really need to question the influence of foreign money. Only millionaires can currently afford the average Vancouver home. Ain’t no millionaires being born overnight in East Van, Burnaby, Coquitlam or anywhere else in 604 land. Immigration minister’s answer to the questioning…”we’ll have to look into it.” Sure, like this is news to you? Soooo….basically, just like Christy Clark, everyone do nothing!

What a joke our politicians are. How did your no-BS attitude ever put up with these political crooks Garth?

#95 Ronaldo on 04.11.16 at 11:01 pm

#60 Naturally on 04.11.16 at 8:50 pm

”Are interest only mortgages a possibility? Why wouldn’t the banks introduce interest only mortgages as a means of making housing ‘affordable?’”

No need to. They are already not affordable at interest only. Besides, in most parts of the country housing is still affordable at current interest rates. They’re not going to make the rules to satisfy the idiots that are over paying in To and Van and the other bubble areas.

#96 Balrog on 04.11.16 at 11:02 pm

Derek r @ 87

Lol… I was reading that few years ago! When garth fires like 10 acronyms and my head was spinning.

Very well done faq. Thank you. should be shown to new puppies.

#97 Nobody on 04.11.16 at 11:07 pm

How do I prove the point?

#98 Bram on 04.11.16 at 11:10 pm

#35 Ace Goodheart on 04.11.16 at 7:38 pm
Assuming you’re right, Garth, how do you suggest one goes about shorting this market?

Buy put-options on mortgage lenders or even better mortgage insurers?

A put on Genworth (TSE:MIC) that expires 1yr from now would be a bet against Canadian Housing. Or longer expiration if they offer them, because the crash may take longer than you think.

The tighter you can predict the timing, the more money you can make. If you know for a fact that it will all come crashing down within 3 months, you stand to make millions with very little investment.

DISCLAIMER: NEVER TAKE INVESTING ADVICE FROM A STRANGER ON THE INTERNET.

#99 YLTNBoomerang on 04.11.16 at 11:18 pm

What I am shocked about is the number of regular folks who when discussion inevitably leads to real estate mention the other house/condo they own and rent out. Sometimes more than one! I live in Van and am an engineer so most of the folks I deal with are other engineers and for the most part are good engineers but green when it comes to finance (I’m also a CPA) and risk.

It’s not going to end well.

#100 Dirty Debtor on 04.11.16 at 11:27 pm

One thing that remains a pain in the ass in lotus-land is the shortage of housing for renters. If you are not in by the first of the month, there is nothing left. Almost no vacancy.

Call me spoiled, but if I’m going to basement dwell, it may as well be at my moms. Still a massive undersupply of rental apartments, with prices reflecting the shortage.

#101 Mark on 04.11.16 at 11:35 pm

One thing that is obvious about most of these transactions — they are not being made between true arms-length entities. So the ‘prices’ quoted really aren’t available to “Joe Sixpack” house owner in Vancouver. Only between speculators. Which makes sense, since Vancouver prices peaked roughly 3 years ago and most of the “increases” are fully explainable on account of the sales mix and transactions in a very small number of units held by speculators. If you don’t believe me on the topic (derived through macroeconomic data), then go listen to Ross Kay who uses microeconomic data to prove the same.

I gotta hand it to the “specu-vestors”, they sure do point on a good show. Unfortunately, there is the occasional real, non-“speculator” hurt quite badly by this. And of course a belief in “appreciation” has kept a lot of good inventory stagnant as the speculators aren’t recognizing the declining prices, nor the heavy opportunity costs they’re now incurring with the combination of carrying costs and declining prices.

“With such low inventory”

There are apparently thousands of vacant units in the Vancouver area. So “inventory” is not low.

Also as a side…. coming through YVR International arrivals last week I noticed all offical signage is now in 3 languages, guess what the 3rd language is…..is that the same at Pearson?

You must be new to YVR. Its been like that for ages.

Many years ago I had a great landlord in the Dunbar area. The guy was pulling down maybe 45k as a professional musician, but managed to get a mortgage on a house on the west side. Filling it with renters, he managed to get leverage on it to get down payments on 4 more homes.

There’s literally thousands of those types in Vancouver. And they’re desperate, desperate as hell to inflate a make-believe narrative of rising prices, “Chinese” involvement, etc.

#102 Mark on 04.11.16 at 11:36 pm

” they sure do point on a good show. ”

should be “they sure do put on a good show”

#103 Move on VREU on 04.11.16 at 11:46 pm

Uh oh VREU, it looks like posters here are validating what I have been saying – the scourge of foreign capital is causing price increases to spread all over Vancouver Island. Prices up 100K over a few months. Bidding wars. Limited Listings.

But you keep to your fundamental economic analysis, and continue to repeat your warning. You will join the ranks of the Vancouver bears you now say, ‘who could have known that prices could go that high for that long.’

#104 Mark on 04.11.16 at 11:47 pm

“Only millionaires can currently afford the average Vancouver home. Ain’t no millionaires being born overnight in East Van, Burnaby, Coquitlam or anywhere else in 604 land.”

No, but lots of millionaires created ~2000 to 2013 (the peak) in Vancouver housing, especially the “speculative” extended families who have been the driving force in the post-peak (post-2013) period. Those people still have equity, and they’re speculating with it. It rather reminds me of the Nortel employees even post-peak, who thought that their shares would return to $110 any day then, and proceeded to put as much money as they could into what they believed were “cheap” shares. Some even sold their other investments and/or took out credit.

Of course, the shares kept going down, and the speculators in Nortel shares, often insiders, lost nearly everything (there’s jokes about cases of beer having a greater return than NT shares on the Internet!). Which is what I expect Vancouver RE to do, a continuation of the trend over the past 3 years.

#105 macroman on 04.11.16 at 11:51 pm

In regards to The Canadian Big Short and how to capitalize, which big six bank has the greatest exposure to oil and housing?

Do I throw a dart or ask Mark?

#106 West Coast on 04.11.16 at 11:56 pm

….we haven’t had a serious downturn here in YVR since the early 80’s……..most people have no idea what might be just around the corner………..
…….this article written in 2010 outlines some possible scenarios should our bubble burst………..

https://s3.amazonaws.com/policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2010/08/Canadas_Housing_Bubble.pdf

“Vancouver’s first housing bubble burst in 1981,
the second declined gradually in 1994. Toronto
had one housing bubble, which burst in 1989.
Otherwise, inflation-adjusted housing prices in
all major Canadian cities remained remarkably
stable from 1980 until 2001. Since then, housing
prices have been steadily rising to relatively new
and possibly troublesome heights.”………..

#107 Snowboid on 04.12.16 at 12:11 am

#103 Move on VREU on 04.11.16 at 11:46 pm…

It’s funny how you believe anecdotal evidence, but won’t use VREBs’ own statistics, which shows that in March 2016 the average price for a SFH was $ 663,300.

Including inflation since 2010 it should be over $ 780,000, so there is something wrong with your story, unless prices went up 15% since the end of March!

#108 For those about to flop... on 04.12.16 at 12:17 am

#102 Mark on 04.11.16 at 11:36 pm
” they sure do point on a good show. ”

should be “they sure do put on a good show”

/////////////////////////////////

I wouldn’t have bothered correcting myself on that one if I were you ,that whole post was a big bag of dog poo on a hot summers day…

M41BC

#109 My dog has issues on 04.12.16 at 12:25 am

Getting sick of hearing about Vancouver real estate.

#110 macroman on 04.12.16 at 12:28 am

Wu who…

Complete with the heroin Vancouver fix…

https://www.youtube.com/watch?v=w58E2S315a4

#111 Frito on 04.12.16 at 12:32 am

I wonder what the catalyst for the correction is going to be? We all know it’s coming but…

#112 NN on 04.12.16 at 12:38 am

Hi Garth,
Love the blog. It’s so refreshing for a millennial such as myself to find a forum full of thoughtful opinions on R.E. when my age cohort is such a hope-fueled gaggle.

Don’t know if you browse the forum website “Reddit”, thought you might find this discussion thread interesting. It’s the same old story, lots of locals leveraging to the hilt or ploughing full equity into a larger home.

https://www.reddit.com/r/vancouver/comments/4e8z3l/people_who_have_bought_houses_recently_how/

I’m curious what you think are the likely triggers for a correction? Deficit-driven inflation forces the BoC to raise rates? US raising rates? Will we literally run out of ppl to force into high-leverage mortgages? I haven’t heard of Canada scraping the bottom of the barrel with subprime mortgages or the similar desperate instruments…

#113 Victoria Real Estate Update on 04.12.16 at 12:42 am

# 103 Move on VREU

You have no credibility.

Here’s what your argument for a permanently rising housing market is all about:

# 197 Move on VREU (April 3rd)

“And no government, whether provincial or federal, and no political party, will ever touch the tools that facilitate this global capital scourge.”

… And HAM is the only reason Vancouver house prices have been rising… And this has made Vancouverites flock to Victoria to buy real estate… And this won’t stop because “no government will ever touch the tools that facilitate this global capital scourge.”… Therefore, house prices in Victoria will never stop rising…

That sums it all up for you. You keep arguing with me based on your whacky assumptions.

I’ve exposed that your argument for higher house prices forever in Victoria is the sort of thing a nutbar would come up with.

As I’ve said, real estate “professionals” like you said the same things in 2010 before house prices significantly in Victoria, putting many families in financial difficulty.

History has shown that housing markets can turn on a dime and we’ve certainly seen that in Victoria in recent years where a rising market suddenly turned into a falling market.

Prices in Victoria will begin to fall again. This month could prove to be the turning point. It could happen any time.

In your mind a global capital scourge is happening and you think that will push prices higher on a permanent basis in Victoria.

Do you think sane people agree with your global capital scourge theory? Perhaps many think you’re a delusional real estate “professional”.

#114 Silver on 04.12.16 at 12:44 am

the increase in property taxes on small business from this speculation should just about fold half of commercial and main street in van…

margin’s are getting crushed there…

Silver

#115 Blogbitch on 04.12.16 at 12:45 am

Just what kind of Kool Aid are people gulping down in these places? Reminds me of song lyrics, “Shiny happy people…” but with new words, “Horny, thirsty people…”

#116 Fed-up on 04.12.16 at 12:52 am

I’m beginning to sound like a broken record but if we can’t get a meaningful correction in Calgary with oil sucking wind between $27 and $37, then how in the hell are we going to revert back to sanity anywhere else? If oil recovers, you can bet on higher prices in Cowtown, take it to the bank.

Does anyone here seriously believe that local buyers, foreign buyers and speculators will all arbitrarily head to the exits at the same time with everyone left dropping their pants down around their ankles? 300,000 new arrivals each and every year will fix any of those unlikely events.

Interest rates will go up? Janet Yellen? Are you kidding me? Even if they do increase 1% higher, that will take about 2 years or more and it’s not enough to make any difference. That has been proven time and time again when they have used “a squirt gun to snuff out a forest fire” type measures for years now. And there is still no guarantee that the BOC would follow in step regardless of fancy past statistics.

Canada will curtail foreign investors? Ya good luck with that. This desperate and broke ass country is one of the few on the planet that will sell out local young buyers for a quick buck without ever asking where it came from.

Boomers will all head to the exits at the same time flooding the market with bargain priced homes? Just keep holding your breath. Maybe you will find an affordable bungalow just shy of your own 68th birthday but I’m starting to doubt that as well, seriously.

Rent and stay liquid? Ya that’s worked out well the last few years. Rentals almost impossible to find close to where most people hold down quality jobs, sky rocketing rents and getting kicked out as soon as your landlord is offered a truckload of money for the pile of shit that you have been paying far too much to live in. Balanced portfolios have been flat or returned paper losses the last 2-3 years.

So move right? Move where? Just quit your job, sell your business and move to a small farming community? I don’t even know where to start with that one. Leave Canada altogether perhaps and what a great solution that would be for you and your loved ones.

Risk? Every worthy investment has risk! What was risky and ultimately financially tragic (stupid) was missing out on the biggest real estate bull run of all time.

Garth still maintains that there will be no crash, just a sticky or stagnant price environment with 15 year melt or something like that. God help anyone who earns a living based this country’s economic conditions and salaries if this turns out to be true. You will not be able to afford a home anywhere near the few economic powerhouses this country has to offer, while still having the ability to control your bladder.

I humbly suggest we stop saying, “this won’t end well” or, “this is year is the year”. Let’s face it, none of us has the 1st clue. Just accept the cards that we have been dealt, ingest the fact that we have been dead wrong for 9 years and counting, and make the best of what is left.

#117 Market Inquisitor on 04.12.16 at 1:42 am

RE: #76 Charlene Geddes

I entered the position at various points with a large portion of my positions executing at $8.55 and $8.5, with an average price of $8.62, which as I wrote in my article that I would acquire more as it approached $8.5. I also collected 2x $0.045 dividends. Which as of yesterdays/Fridays date adds up to 16%.

I don’t claim to be an expert, I write articles on topics I believe need to be addressed and have no gain other than fact-based objective discussion and investor education.

Thanks,

MI

#118 Victoria Real Estate Update on 04.12.16 at 2:21 am

# 80 Island Girl

Do you have any verifiable facts to prove that the houses you talked about sold for the prices you claimed?

Do you think, perhaps, that thinking that the value of your house increased 35% year over year is a little delusional?

Garth has written much about Vancouver’s market lately and how the current behaviour and attitude of buyers leads to big problems for many in the future.

Many west coast American cities saw prices decline more than 50% enafter buyers there behaved much the same as those in Vancouver today. Prices in several American cities fell to pre-bubble / pre-boom levels and many families experienced severe financial distress.

Canadians have higher debt loads than Americans had prior to their price decline. Canadians will also face rising interest rates as prices fall.

That buyers get excited about rising prices is human nature. However, you must remember that sellers get as emotional when prices fall and rush for the exits, pushing prices down, moving the market down the same way that excited buyers moved it up.

Prices will begin falling again in Victoria.

Paper gains are only realized after selling, those gains don’t get locked in.

Again, please provide details of those sales.

#119 YVR Update on 04.12.16 at 2:53 am

There will be no crash in vancouver as this is not a locally driven phenomena.

Rampant temp immigration coupled with crazy money inflows ensures this lasts for years.

Don’t be fooled. Banks know exactly whats going on. And it aint local working people loading up on debt on $3 million dollar houses.

#120 Give us this Blog our Daily Garth on 04.12.16 at 3:50 am

“The intersection of greed and stupidity is a tough place. Katy lives there.”

Superb blogerature, Garth.

#121 Koshy Alex on 04.12.16 at 6:32 am

Chinese Scions’ Song: My Daddy’s Rich and My Lamborghini’s Good-Looking
http://nyti.ms/1Wp73QI

#122 nubbers on 04.12.16 at 6:42 am

Chaddywack @36
A guy at my work just bought his 4th house this year. (He’s Asian, but born in East Van–a lot of people mix him up as a foreign investor at open houses apparently from what he tells me!) anyway he mortgaged his house in West Van worth about $3M to buy 2 houses earlier this year, then a third, now a fourth!!! Yes he has a ton of equity in the fully paid off West Van house, but wow.

I would regard this as being primarily greedy, with the stupidity element being driven by the greed.

The vendors, I would not consider to be greedy, unless there is some dishonesty such as misrepresenting the property. They have every right to get the highest price the system will allow, after all, they might have to support a purchase elsewhere.

With 4 overpriced mortgaged properties to 1 paid off property, Chaddywack’s colleague has surely doomed his retirement.

In a similar but less extreme vein, I know (at least) 2 professional couples who have recently doubled up on their exposure to property by not selling when they moved at, what I consider to be, the height of the market. This causes endless trouble at home as my other half thinks they are financial geniuses and constantly calls me a coward (and other things) for being a renter. Time will tell, I guess.

#123 Luc on 04.12.16 at 7:17 am

New-York Times article on Chinese moving to Canada
http://mobile.nytimes.com/2016/04/13/world/americas/canada-vancouver-chinese-immigrant-wealth.html?_r=0

#124 jess on 04.12.16 at 7:51 am

“democracy spring” reclaiming the henhouse?

GERARD RYLE: We had a prime minister resign, we had the head of Transparency International in Chile resign because it turned out that he had five offshore companies which was clearly a conflict of interest. Today we had someone from Austria, a major banker resign.We had a member of the FIFA ethics committee have to resign when it turned out in fact he was the accountant for a number of the FIFA officials who had been indicted by the FBI for that scandal, and we have more to come.

— Gerard Ryle, Director, International Consortium for Investigative Journalism (ICIJ)
I mean, we have every document, every email, every client, all the passports of all of the clients that they had ever worked with for 40 years,
http://www.abc.net.au/mediawatch/transcripts/s4441361.htm

#125 Noel on 04.12.16 at 8:21 am

Greedy idiots for buying a house at prices you don’t think are sensible? That’s not very nice of you.

I’d say the greedy idiots are the ones who sat on the sidelines three, five, seven, years ago because they thought RE was detached from ‘fundamentals’ and were waiting for a correction, and to buy a house on the cheap. It wasn’t detached from fundamentals, its just the fundamentals have changed and they missed it.

The only thing we know for sure is that those holdouts who were/are waiting for a correction made a mistake then. Oh well, at least they get to feel superior to everyone else, knowing how smart they are when it comes to real estate valuation, waiting for the meltdown that’s always just a few months away.

#126 Andrewt on 04.12.16 at 8:30 am

#112 NN on 04.12.16 at 12:38 am
Hi Garth,
Love the blog. It’s so refreshing for a millennial such as myself to find a forum full of thoughtful opinions on R.E. when my age cohort is such a hope-fueled gaggle.

Don’t know if you browse the forum website “Reddit”, thought you might find this discussion thread interesting. It’s the same old story, lots of locals leveraging to the hilt or ploughing full equity into a larger home.

https://www.reddit.com/r/vancouver/comments/4e8z3l/people_who_have_bought_houses_recently_how/

I’m curious what you think are the likely triggers for a correction? Deficit-driven inflation forces the BoC to raise rates? US raising rates? Will we literally run out of ppl to force into high-leverage mortgages? I haven’t heard of Canada scraping the bottom of the barrel with subprime mortgages or the similar desperate instruments…

—-

It looks from my punter’s standpoint like the catalyst will be the weight of people’s ever increasing debt principles being too much to manage, even with low rates. When that will be exactly, who knows, but it seems we are determined to find out.
It’s a scary thought, quite frankly, because if that ends up being the scenario, I can’t imagine how it will happen in an orderly fashion.

#127 Rational Optimist on 04.12.16 at 8:43 am

“Consumer confidence, incomes, job prospects and property values are now stagnant or falling in a majority of cities, from Saint John’s (the oil money is gone), to anywhere in Nova Scotia (or Saskatchewan), Winnipeg, pretty much all of Alberta, anywhere 60 km from King & Bay…”

I note that King & James in downtown Hamilton is about 68 kilometres from King & Bay. That’ll take you about an hour and a half by car during the work week if you’re lucky, and an hour during quiet times. Likewise with transit, you can get to Union Station in an hour and a quarter (four trains to choose from now!), or an hour on the express bus if you’re willing to travel outside of normal human operating hours.

Yet prices are (supposedly) advancing. Here’s the kind of “news” Hamilton media breathlessly report: http://www.cbc.ca/news/canada/hamilton/news/hamilton-house-one-dollar-1.3529391

You might think that $290,000 is a screaming deal for a detached house anywhere, but you wouldn’t want to live in that neighbourhood and, being in the east end, you can add to the travel times above. Yet this thing has gained 74% in three years? Bizarre. Good for the sellers; dumb move on the part of the buyers. Rents in that neighbourhood don’t support that. Incomes in Hamilton (by which I mean Burlington or Mississauga- you have to leave Hamilton to work) don’t support that.

Best I can guess is that buying in Hamilton, insofar as any of this is true, is a bet both that the Tories never get in provincially, and that the province can continue incurring debt until it’s able to build out its “Go RER” plan. If that can one day happen, I suppose these owners expect they’ll own a detached home within fifty minutes’ train ride to some real jobs in downtown Toronto. But, you know, it will still be in Hamilton.

#128 WalMark of Sadkatoon on 04.12.16 at 9:27 am

Wow IQ is negatively correlated to YVR and YYZ real estate prices.

#129 WalMark of Sadkatoon on 04.12.16 at 9:31 am

I bought 10 months ago in Vancouver. Just sold for 325k over and above what I paid (accounting for all expenses).

Nice. YVR and YYZ real estate continues to reward buyers until it doesn’t

#130 Estrella on 04.12.16 at 9:33 am

Russian roulette anyone?

http://www.theglobeandmail.com/news/british-columbia/brokers-concerned-about-real-estate-offers-made-with-no-conditions/article29603246/?cmpid=rss1&click=sf_globe

Buy houses with no conditions now requires you sign off on real estate liability and reaffirm that you’re stupid.

#131 WalMark of Sadkatoon on 04.12.16 at 9:34 am

#67 neo on 04.11.16 at 9:14 pm

The post is accurate. Sellers are in complete control as prices climb to ridiculous levels. Good for them.

#132 WalMark of Sadkatoon on 04.12.16 at 9:38 am

Anyone know of a quick and dirty way of shorting the Canadian housing market?

Be glad you can’t. You would have been broke. Repeatedly.

#133 lee on 04.12.16 at 9:40 am

#116 Fed Up,

If and when the crash happens it will be people with properties purchased 5 years ago or more that will be in the lead buying up discounted properties. People who have made a bundle on the real estate market are also waiting for the downturn, not just renters. If it happens, they will liquidate and wait to buy back in, except they will be doing it with lots of cash made on the way up. As I always say, it is not a good strategy in life to wait for bad times so you can try to prey on someone else’s misery. Governments will always protect the brave, not vultures. I think anyone who has waited around for a crash should be decimated by the market, and however long it takes to retract, which by the way, will be never, given the tools the government has at its disposal to protect homeowners. Soon it will be 40-year amortizations, then partial write off of mortgage interest, and eventually tax-free gains on rentals.

#134 WalMark of Sadkatoon on 04.12.16 at 9:42 am

#61 BoBo on 04.11.16 at 8:55 pm

This is happening in Kingston? Thousand Islands? Belleville? That’s nuts. Hard to blame a 20-something who has only seen real estate as a sure thing. Like taking candy from babies

#135 cramar on 04.12.16 at 9:57 am

#63 BOOM! on 04.11.16 at 9:00 pm
oops two lots for $14,000….

————-

Go fur it!! The downside risk is not much.

#136 cramar on 04.12.16 at 10:18 am

Saw a black girl on a U.S. TV show yesterday saying that when she finished college she became a RE agent and made big money. She put all her wealth into RE and was making up to 7 figure income. She was on top of the world!

Then 2008 hit! She was totally wiped out!

But hey. . .that was America! This is Canada. We are different.

It’s always amazing that people will not, cannot, learn from the past or others. They always repeat the same mistakes, and never learn unless they experience it themselves.

But alas, that’s human nature.

#137 WalMark of Sadkatoon on 04.12.16 at 10:34 am

as I predicted, inflation in Canada

http://www.cbc.ca/beta/news/business/bank-of-canada-inflation-target-negative-1.3530018

#138 Al on 04.12.16 at 10:43 am

This article in the Montreal Gazette claims that you can get a 9.1% annual return on purchase of a $370,000 Condo in Toronto with 20% down and rental at $1,600/month ! Looks like the forgot to deduct costs such as property taxes and CAM fees; http://www.montrealgazette.com/business/cnw/release.html?rkey=20160411C6372&filter=5611

#139 IHCTD9 on 04.12.16 at 10:49 am

#14 Sheane Wallace on 04.11.16 at 7:09 pm

Pitchforks coming for the drama teacher’s but?

______________________________________

T2’s azz probably:

I was talking with my bro last night. He had just come back from getting his taxes done. They had really pounded it into RRSP’s last year after selling an investment property, and made every deduction possible on their home based business. She makes good bucks, he is a entrepreneur/business owner.

He asked me how that new child care benefit worked out for us.

Well, because they knocked the family income down so far, he will not only be getting a huge tax return, but also a $1200.00/month child care benefit!!

That’s right, T2 is giving a couple with a paid for house, investment properties, and hundreds of thousands in the bank $14,400.00 over the next 12 months LOL!

I think T2 may well have created a policy that will get Canadians saving for retirement again! (at least if you have a few kids)

I may start liking this guy yet :)

#140 LP on 04.12.16 at 10:54 am

#62 BOOM! on 04.11.16 at 8:59 pm
HA!! I NEVER thought I would again buy real estate, but….
Our little village has ended up with the lots from a local developer who went bust, in the great USA real estate unwind from 2008 onward. The village is now selling the remaining fully improved lots at $7,500 each or 2 lots for $15,000

****************************

Your post reminded me of my days as a pt grocery store cashier back “in the olden days” when I was a teenager. The store had posted a special on canned vegetables – 25 cents a can. Couldn’t move those suckers for love nor money.

The manager put up a sign advertising the same cans of veg @ 3/79 cents. He had to order more to finish out the week. You gotta love the consumer!

F68ON

#141 TurnerNation on 04.12.16 at 11:03 am

Not sure about Soccer hair but blog dog Poloz has Hockey Hair.

#142 Vancouver loser on 04.12.16 at 11:13 am

I was catching up on old posts, North Vancouver up 26%. I guess I am the loser. I bought for $412,000 in January and the same unit same condition just sold last week for $469,000. only 14% gain. I am really tempted to sell! then I do not pay the land transfer tax ha ha.
Okay its cheaper for me to have a mortgage then then to rent, I was paying $2,300 a month. Now with $80,000 down Mortgage, taxes and strata fees, $2,000 a month. I still have $300,000 invested at 5% so for me mortgage at 2.69 for five years make sense! it is a crazy world out there.

#143 For those about to flop... on 04.12.16 at 11:29 am

For those debating Tesla’s reliability, they have just recalled all of their Model X’s due to seating issues.
Source CNN.

M41BC

#144 Vamanos Pest on 04.12.16 at 11:34 am

#65 “the real culprit is speculation”

Wrong. Residential RE is absolutely NOT a free market. It is HEAVILY influenced by the CMHC, a government controlled, taxpayer underwritten, insurance program that removes all risk from the lender.

End the CMHC and then I’ll accept your argument that this is just the workings of a free market. (Will never happen, the market in Vancouver would drop %75)

#145 Charlene Geddes on 04.12.16 at 11:36 am

#117 MI ….what an amazing ‘coincidence’ that the published 2 week low made Dec 2015 against yesterdays closing number without dividend is exactly 16%……. a miracle of mathermatics.

#146 Willdaman on 04.12.16 at 11:40 am

#116 Fed-up on 04.12.16 at 12:52 am
Best comment I’ve read in years.

Just my 2 cents adding to some of your thoughts…

Interest rates will not be going up to any significant extent for probably years and years…

http://www.ctvnews.ca/business/finance-officials-facing-a-chronically-weak-global-economy-1.2855452

2 tidbits I found interesting from the article:

1) A rising [US] dollar has pinched American factories by making their goods more expensive in foreign markets and contributing to a sharp deceleration in U.S. growth since late 2015.

2) Maurice Obstfeld, chief economist of the International Monetary Fund “issued an urgent warning for countries to make a pre-emptive effort to jump-start their economies through continued low rates, government spending that encourages growth and reforms that promote economic efficiency”

If the rest of the world is being encouraged to keep their interest rates low and they do in fact stay low, the consequence of the US raising their interest rates will be a strengthening of the US dollar, which will kill US growth…which would probably result in the US dropping rates to re-stimulate growth.

Regarding those here who extol the virtues of renting, job-hopping and moving at the drop of a dime, they clearly don’t have kids nor value any of the social constructs developed when you live in a community longer term.

If I didn’t give a sh*t about uprooting and moving kids to different schools every so often or moving away from family, friends and trusted neighbours who look out for me, I would be fine with renting and switching jobs every few years and looking for cheaper and cheaper places to live so I could pile money into my portfolio.

What gets lost in the rent/stay liquid & mobile vs. buy debate is the soft value of being able to lay down roots and stay put on your own terms (I acknowledge that people can get this through renting, but risk of getting the boot is a reality). Garth obviously gives zero value to this and only looks at from a straight numbers perspective, which is fine for him and others that don’t value the things I’m talking about.

#147 hope & ruin on 04.12.16 at 11:40 am

#113 Victoria Real Estate Update on 04.12.16 at 12:42 am
# 103 Move on VREU

You have no credibility.
____________________________________

you say this at least once a week. It’s an anonymous internet forum….what credibility does anybody have?? lol

#148 hope & ruin on 04.12.16 at 11:45 am

Check your cars blog dog, the takata air bag recall claimed another life last week. Make sure you’re cars are not on the list, my extended family had at least 5 affected vehicles. This is a couple years old but I didn’t realize how expansive the list of affected cars is:

http://www.safercar.gov/rs/takata/takatalist.html

#149 Willdaman on 04.12.16 at 11:45 am

#136 cramar on 04.12.16 at 10:18 am
Saw a black girl on a U.S. TV show yesterday….

________________

What exactly does the girl being black have anything to do with your point?

#150 MarketInquisitor on 04.12.16 at 11:46 am

#145 Charlene Geddes

I don’t really understand your implication. I said ~16% because that’s how much my position is up. I don’t think it’s unreasonable for me to be purchasing shares of something I wrote about, at the prices I said I would be entering before they actually occured, especially since my avg position was about 0.13 cents away from 52WL. I am not selling any kind of service, nor do I have ads; just sharing my thoughts. I will be ignoring any further needlessly aggressive posts.

I hope not all people become this venomous when they get old.

#151 Fed-up on 04.12.16 at 11:53 am

#133 lee on 04.12.16 at 9:40 am

#116 Fed Up,

If and when the crash happens it will be people with properties purchased 5 years ago or more that will be in the lead buying up discounted properties. People who have made a bundle on the real estate market are also waiting for the downturn, not just renters. If it happens, they will liquidate and wait to buy back in, except they will be doing it with lots of cash made on the way up. As I always say, it is not a good strategy in life to wait for bad times so you can try to prey on someone else’s misery. Governments will always protect the brave, not vultures. I think anyone who has waited around for a crash should be decimated by the market, and however long it takes to retract, which by the way, will be never, given the tools the government has at its disposal to protect homeowners. Soon it will be 40-year amortizations, then partial write off of mortgage interest, and eventually tax-free gains on rentals.
——————————————————————————–

I fear that you are correct on all fronts Lee.

#152 IHCTD9 on 04.12.16 at 11:56 am

#62 BOOM! on 04.11.16 at 8:59 pm
HA!! I NEVER thought I would again buy real estate, but….

Our little village has ended up with the lots from a local developer who went bust, in the great USA real estate unwind from 2008 onward. The village is now selling the remaining fully improved lots at $7,500 each or 2 lots for $15,000 These are like 110 ft by 180 ft lots and were originally offered, and sold for $29,000 to $42,900.
I will probably buy two, cash (most from my stock market earnings thus far in 2016). While I have no immediate plans for them, the ones I want front a bike path, an old abandoned RR right-of-way, decent views.
Our home is nearly 20 years old now, we could sell this, and build fresh. Much to say about new mechanicals, and appliances. Besides a new triple garage with water would be a great addition! That Caddy isn’t getting any younger.
_________________________________________

That sounds so cheap, even to a rural Ontario dweller. You’d have to get north of 7 to see deals like that. Where I am located, a done and serviced acre lot (208′ x 208′) usually goes for about 60 grand.

Make sure your not on the hook for tax arrears…

#153 Bottoms_Up on 04.12.16 at 11:57 am

#139 IHCTD9 on 04.12.16 at 10:49 am
————————————————–
Don’t be surprised if they don’t count RRSP contributions in calculating family GROSS income…..

check out the on-line calculator offered by the Libs, it clearly shows the benefit is payable based on gross income. You friend may get quite the surprise…..

#154 Bottoms_Up on 04.12.16 at 12:08 pm

#98 Bram on 04.11.16 at 11:10 pm
——————————————
That’s assuming, of course, that GenWorth themselves aren’t hedged, which I’m sure they are. So your gains may not be as big as you expect.

#155 bdy sktrn on 04.12.16 at 12:13 pm

#139 IHCTD9 on 04.12.16 at 10:49 am
———————-
try knocking a zero off those numbers

120/mo , not 1200.

i get 60 for one

#156 Ogopogo on 04.12.16 at 12:23 pm

#20 Frank on 04.11.16 at 7:18 pm
I consideres buying 18 months ago in YVR but didn’t becasue of bear talk. Now I went to bid on a townhouse I could have bought back then only to be outbid by $300K. Even with a 30% crash I still should have bought. I’m priced out. It’s not a realtor slogan, it’s a reality of living here. I’m moving in 2 years from a city I love because I didnt buy 18 months ago.

Just rent you say? Need more space so I have to leave my $1600 1 BR, it’s only that much due to rent control. What does another bedroom cost in my area now to rent? $2800. If I bought 18 months ago I would be paying $2400/month.

Frank, I’m sorry but you sound dumber than a bag of nails. Rear view “investing” is the classic sign of a financially illiterate rube. No talk of the investments you’ve made with the money saved from renting and not paying the myriad costs associated with home ownership.

Just another sad, bitter buffoon.

#157 Bottoms_Up on 04.12.16 at 12:24 pm

I do not deny a foreign influence, but it is the locals who do over nine trades in 10 and are responsible for the market’s advance. The local culture is now decidedly speculative, and inherently dangerous. — Garth
——————————————————-
To be fair Garth, don’t you think that that 10% of sales are skewed to the “higher-end” houses? Could in fact 50% (or more) of the top end sales be due to foreign money?

If so, what is the impact of this on the whole market? What happens if/when the foreign money dries up and high-end houses are no longer changing hands?

Saw on bloomberg an analyst discussing how the money supply in China is considered to be 2x what it needs to be for the local economy, thus perhaps explaining some of the foreign money flowing in (ie, Chinese money is in oversupply right now).

#158 46 and 2 on 04.12.16 at 12:27 pm

Change and strongly enforce the primary residence rule. Short term flipping has to be reeled in.

#159 Cottingham a bargain on 04.12.16 at 12:31 pm

The ” mania” for RE that is occurring in Vancouver should only give pause for the bears on GTA RE that perhaps , just maybe they are wrong.

I say we have seen nothing in the GTA yet until we get to Vancouver levels.

Ya I know , correction coming.

#160 Cottingham a bargain on 04.12.16 at 12:38 pm

#125 Noel – I liked your comment

As for all the cowboys who come on here with their ” unique” question revolving around a methadology on how to short the housing market, you would all have been wiped out a long time ago and the subsequent short squeeze would have taken GTA real estate prices to where it really belongs , which is about double from here

#161 It never ends on 04.12.16 at 1:14 pm

Everybody I talk to in YVR is talking about how rich they are getting off of RE in this town. Because they are. With this environment and these conditions, I honestly see no end in site and I have been saying this for years.

I can’t imagine this thing crashing unless something global/huge comes down – something massive. Low rates/ZIRP/NIRP, QE, bail outs, bail ins, and all THIS money chasing RE will keep the party going for years to come.

The last 3-5 years I have changed my mind, from expecting a correction to giving in to the fact that Central Bank interventions around the globe will keep this thing going until, some day, it all comes crashing down – but I’m not holding my breath. This is the new normal.

#162 family beagle on 04.12.16 at 1:44 pm

I rent in 604 and own in 250. No debt, no mortgage. What’s that Oasis song, “Where were you while we were buying land?”

Speculators I get. Owner envy I don’t. I gave my kids an acre of ranchland each (that I bought for pennies/sqft), so if they lever into YVR RE, they go in as a speculator. One might invest in a cheap Fraser Valley apt for fun.

If you can’t be buried on it, you don’t own it.

#163 Smoking Man on 04.12.16 at 1:52 pm

The 11-day fever,
The last night I drank of smoked it was fire on all cylinders, I had 3 bottles of 750ml wine, I micky of JD and 10 shoots of crown.

Went to bed and waked up normal, had a coffee, seeing that I over did the night before I thought I would take a nigh off.

Next morning here is the crazy high fever. Feed it Tylenol.
This game goes on for week. Till the Tylenol stops working.

I check into St Joseph’s, emergency for two days 10 doctors, and no conclusions as to what is going on.
They loaded me up on every drug known to man. On Sunday the fever broke for good.
I ask the doc, so what was it. He blurts out phenomena.

Yea?, No flam or mucus or coughing, truth is they never found out, but have some USA MD coming to meet with me. Also I should be dead fever was that high.

I’m a non Smoker Now

#164 Vangrrl on 04.12.16 at 1:55 pm

Here they are, the kool aid drinking locals themselves:

http://www.cbc.ca/news/business/real-estate-house-prices-millennials-1.3514476

#165 For those about to flop... on 04.12.16 at 2:12 pm

Hey Boom,John Kasich’s campaign manager emailed me yesterday to see if I could come up with a catchy slogan for the run in, and this is what I came up with.

JOHN KASICH…UNLIKE THE OTHER TWO TWERPS,HE’S GOT THE BASICS…

M41BC

#166 Bram on 04.12.16 at 2:13 pm

#154 Bottoms_Up on 04.12.16 at 12:08 pm
That’s assuming, of course, that GenWorth themselves aren’t hedged, which I’m sure they are. So your gains may not be as big as you expect.

Good point, but:
If they hedged, it would save the company, and not so much the stock price:

Perception and sentiment influence the price just as much as fundamentals do.

If YVR and TO do -50% on R/E, there is no way that Genworth stock stays level. Anyone holding puts is set to make a big sum.

Personally, I’m not betting against R/E though.
Who knows how long the market stays irrational?
It could be like this for another 7 years for all we now.
Despite what Garth says, interest rates will go down again, not up.
Canada will mimic Japan, not US.

YVR price growth may be unsurpassed in the world, it has a long way to go before it rivals Monaco’s USD$1M / 180 ft²

YVR hasn’t even come close to the mondial top-10 yet:
https://www.biv.com/article/2016/3/vancouver-home-price-growth-tops-100-global-cities/

Bram

#167 Asama on 04.12.16 at 2:40 pm

Hey Garth,

These days it seems like most of your posts are about Vancouver. I do agree with you that Vancouver prices have gone ridiculous. However some parts of the GTA are still okay. Take Brampton as an example. You can still get a 1800 square foot town freehold for about 400,000. The price is still alot better then other parts of the GTA and Van City. Your thoughts on Brampton?

But it’s still Brampton. — Garth

#168 cramar on 04.12.16 at 2:42 pm

#149 Willdaman on 04.12.16 at 11:45 am
#136 cramar on 04.12.16 at 10:18 am
Saw a black girl on a U.S. TV show yesterday….

________________

What exactly does the girl being black have anything to do with your point?

================

Just an identifying sign. I think she was from a state where housing got especially hit hard.

#169 Debtfree on 04.12.16 at 2:46 pm

CHP.UN ? On the heels of the loblaw deal ?

#170 Lynda on 04.12.16 at 2:46 pm

We sold in june 2014 in N Van. Nice area & got 1.3 mil & thought we had hit the jackpot. my neighbor sold last week (exact lot slightly better home but still circa 1960) got 2.216mil. Whhhaaaaaaaaat? they are moving to Victoria like a lot of others from that neigbourhood. We moved to the USA where houses are for sale & on the market for years & not selling or appreciating much. Wish we still had our house.miss it

#171 family beagle on 04.12.16 at 2:51 pm

#161 It never ends on 04.12.16 at 1:14 pm
The last 3-5 years I have changed my mind, from expecting a correction to giving in to the fact that Central Bank interventions around the globe will keep this thing going until, some day, it all comes crashing down – but I’m not holding my breath. This is the new normal

So what if is… Rent and enjoy the gold plated infrastructure free of charge. Zero wait time medical care, concierge service at dollar stores, complementary dogpoo bags at parks. Be thankful there’s none of the grinding golf cart commutes and wanton backyard pools you see in Palm Springs where RE is half the price. Here it’s all work-until-you-drop-to-pay-your-mortgage carefree spirit of denial. Just don’t tell anyone we can easily fit 20 million more people in east of Langely.
http://www.bcrobyn.com/2012/12/how-big-is-british-columbia/

#172 Mark on 04.12.16 at 3:05 pm

“as I predicted, inflation in Canada

http://www.cbc.ca/beta/news/business/bank-of-canada-inflation-target-negative-1.3530018

Reads like an article that was written a few months ago. Because the loonie is on the rise (and going dramatically higher in the years to come), and a continuation of falling house prices will make it very difficult for policy makers to create demand. Inflation is no issue whatsoever, and it is silly to think that the “target” needs to be expanded when it is doubtful they could even meet a 2% target without the application of unconventional policy.

Its not quite time for a BoC cut tomorrow (so Marks prediction: no cut!), but next meeting, if the CAD$ continues to surge and deflationary forces mount, they’re going to have to think long and hard. Manufacturers who declined to “invest” in significantly added production in Canada a few months ago at the bottom are being vindicated for taking a slightly longer view.

#173 45north on 04.12.16 at 3:10 pm

Fed-UP: we have been dead wrong for 9 years

guilty as charged

but as house prices in the US crashed, the US Federal Reserve lowered interest rates from 5% to 0%. The underlying factor in Canada is the same as the US: debt.

AndrewT: the catalyst will be the weight of people’s ever increasing debt principles being too much to manage, even with low rates. When that will be exactly, who knows, but it seems we are determined to find out.

like walking on a frozen lake in the spring to see exactly where you will fall in

Chaddywack gives us an insight into where we are and what will happen: A guy at my work just bought his 4th house this year anyway he mortgaged his house in West Van worth about $3M to buy 2 houses earlier this year, then a third, now a fourth!!! Yes he has a ton of equity in the fully paid off West Van house, but wow.

so the guy at work is into the bank. If prices decline, is he ready and able to make payments? Fundamentals: in his case, rents do not support purchase price.

to go back to Fed-up: Does anyone here seriously believe that local buyers, foreign buyers and speculators will all arbitrarily head to the exits at the same time

reminds me of the story of the man caught out in the forest during a rain storm. He went under a tree to stay out of the rain. Someone asked him what he was going to do when the rain dripped through the tree. He said “I’ll go to the next tree”.

#174 Mark on 04.12.16 at 3:14 pm

“Saw on bloomberg an analyst discussing how the money supply in China is considered to be 2x what it needs to be for the local economy, thus perhaps explaining some of the foreign money flowing in (ie, Chinese money is in oversupply right now).”

Canadian housing can’t be bought for shekels, Yen, Renmibi, Rubles, or US dollars. It is always bought in Canadian dollars. So you can look at the statistics around demand for Canadian dollars. You can also look at whether or not mortgage credit is falling in Vancouver which would be indicative of inflows (after all, if houses are being sold “in cash” to foreigners, mortgage credit should be falling).

Thus far, there is neither evidence of significant demand for CAD$ , nor is there falling mortgage credit. Hence, the evidentiary basis, at least for foreign inflows, to the Vancouver RE market, is practically non-existent.

Most price changes to the ‘headline’ transactional averages quoted by the Realtors are fully explainable as shifts to the sales mix. Basically a lot of higher-end properties changing hands as locals, whether speculators, or locals moving up, comprise a historically disproportionate amount of the transactional base with the lower end having disappeared.

Go listen to the Ross Kay interview on TalkDigitalNetwork. He even explains it down to the individual neighbourhood level.

https://www.youtube.com/watch?v=wvFtTOrNb5E

Everybody I talk to in YVR is talking about how rich they are getting off of RE in this town. Because they are. With this environment and these conditions, I honestly see no end in site and I have been saying this for years.

Sounds just like the Nortel party @ $110, on its way to $200 and a market cap closing in on a trillion. What that does tell you is that there are an awful lot of people, outright speculators and “ordinary” people who are unwitting speculators, with awfully extreme interests in maintaining the perception of momentum.

#175 Moller on 04.12.16 at 3:25 pm

I don’t see how these stories, about foreign money propping up the real estate market, make any sense.

If this were true, wouldn’t we see a huge demand for the Canadian dollar, and a better exchange rate than we do now? After all, foreigners do need our dollar to buy real estate.

I do understand that the oil bust had a major factor in causing the decline in the value of the dollar. But with all this “supposed” foreign money coming in, shouldn’t we see a raising demand for the dollar?

#176 IHCTD9 on 04.12.16 at 3:28 pm

#153 Bottoms_Up on 04.12.16 at 11:57 am
#139 IHCTD9 on 04.12.16 at 10:49 am
————————————————–
Don’t be surprised if they don’t count RRSP in calculating family GROSS income…..
contributions
check out the on-line calculator offered by the Libs, it clearly shows the benefit is payable based on gross income. You friend may get quite the surprise…..
_____________________________

I checked out the calculator, and it asks for your “net” income for yourself and spouse however that is defined. I did run some numbers though, using before tax, gross numbers.

I don’t know the specifics for my bro, but I filled in some rough guesstimate numbers for them based on 85K family income before tax and 3 kids, the benefit ended up at 8200.00 per year. A quick refinement to reflect reality as the bro pays himself as a business owner and knocked 10K off his income and a more realistic property tax number has the benefit jumping to almost 9 grand. The real possibility that bro may be claiming zero formal income would see them getting a little over 10K (enough to have made my old mortgage payment every month for the last 9 years it existed)

I ran rough gross numbers for my family as well, and came up with an annual benefit of $3300.00 based on a family income of 114K/yr and two kids. There are 3 other benefits from Ontario I did not qualify for that my bro might.

Bottom line, if you’re wrong about the rrsp deductions off income, its obviously party time. Both numbers represent a good chunk more than we used to get. Both numbers use gross incomes. Both numbers are pretty hefty given both couples used as examples here are doing just fine with 6 figure portfolios, investment properties, and paid off houses.

I’m not an accountant, I don’t know the rules, I don’t know what I can get away with – there is probably a grand or two additional right there.

Hey, I like getting money in the mail from the Feds, but even so, this seems pretty generous no?

Maybe I should just keep my mouth shut :)

I am getting my taxes finished up later this week, if you like; I can report back with the verdict.

#177 IHCTD9 on 04.12.16 at 3:32 pm

#155 bdy sktrn on 04.12.16 at 12:13 pm
#139 IHCTD9 on 04.12.16 at 10:49 am
———————-
try knocking a zero off those numbers

120/mo , not 1200.

i get 60 for one
___________________________________________

Looks like I’m going to get no less than 275.00 for two based on the lib calculator.

If anything, I will probably end up with more.

I’ll know better what is up with my bro after I see what I get – either way, 9K a year for their family is entirely possible based on the lib calculator.

#178 IHCTD9 on 04.12.16 at 3:42 pm

#163 Smoking Man on 04.12.16 at 1:52 pm

I’m a non Smoker Now

_________________________________________

Good to hear. I am 4 done weeks myself. I just couldn’t pay T2/Wynne anymore. I knocked 130.00/wk of retail spending off the table, and a good 50.00 of that was sin tax on ciggies.

No more smokes
No more Timmies Coffees (sucks now anyway)
No more going out for lunch

Think of the screwing you’re throwing into Wynne and T2, you’ll be so happy you might even cut back on booze too!

#179 Move on VREU on 04.12.16 at 4:42 pm

If there is no interest rate hike in June, then it will not happen in 2016, and it will join 2015 as the year without hikes – a .25% hike and then federal brakes does not count when there were supposed to be 4 hikes a year for 2 years to normalize rates.

One measly .25% hike in late 2015 spooked the market and the Feds, which means the rate of normalization may take 5 years instead of 2.

An old advisor once said the fed is always overly optimistic in its interest rate projections, and it looks like that this is the case again.

If it takes 5 more years to normalize, then all those waiting with the mantra – “I’d rather buy with higher rates and lower prices” will have missed 5 easy years to pay down a mortgage. The amount you can pay off in 5 years will more than offset a measly price correction of 20%, since there will be no ‘crash.’ Besides, if prices rise another 20%, then all owners now will be sitting even better off.

The scourge of foreign capital is not easing – there is more money out there and more people fleeing to safe havens than be absorbed easily.

Remember, if 8% of US buyers caused a 32% drop in house prices nationally, 5% purchases with foreign capital can just as easily cause prices to shoot up. No one can deny this logic trap, and no one has even attempted to.

#180 Renter's Revenge! on 04.12.16 at 4:48 pm

#162 family beagle on 04.12.16 at 1:44 pm
I rent in 604 and own in 250. No debt, no mortgage. What’s that Oasis song, “Where were you while we were buying land?”

That’s not how it goes!! LOL

#181 maxx on 04.12.16 at 4:48 pm

#48 Linda on 04.11.16 at 8:18 pm

“Garth, you can warn all you want but – the tide is against you. The bubble/gold rush/tulip speculation madness is ON & until it explodes with the resultant carnage nothing can be done.”

Not the point.
Garth is getting a lot done – although many are not taking a blind bit of notice, many others are and their finances and lives will be much the better for it.
That is the point.

#182 bill on 04.12.16 at 5:00 pm

#180 maxx on 04.12.16 at 4:48 pm
Garths advice has been very helpful here.
the etfs and a couple of preferred stocks that we own as per Garths advice are doing well and kicking out dividends.
the two Canadian oil oil stocks that I picked for a bit of a flutter, continue to plumb the depths.

#183 understood by few on 04.12.16 at 5:12 pm

#174 Mark on 04.12.16 at 3:14 pm
“ordinary” people who are unwitting speculators
——————
I love the term “unwitting speculators”. It hits the nail on the head. It’s the same people who would blame “speculators” for a variety of woes. Only to them speculators are people who work on wall street.

If you engaging in risky financial transactions in an attempt to profit, you are by definition a speculator. Of course these unwitting speculators think real estate somehow differs from futures, stocks, forex, fine art etc. Those are risky investments. Real estate is safe! It always goes up in value! Vancouver is different. It’s a “world class” city. Desirable!

#184 Snowboid on 04.12.16 at 5:17 pm

#179 Move on VREU on 04.12.16 at 4:42 pm…

When you wish upon a star, makes me wonder who you are…

But keep on pumping, I’m sure there may be at least one person who reads this blog that believes that real estate always goes up!

#185 understood by few on 04.12.16 at 5:29 pm

#184 Snowboid on 04.12.16 at 5:17 pm

But keep on pumping

——————

So another pseudonym for VREU? I mean, who else is obsessed with these mythical real estate “pumpers”? The ones that fake verifiable sales numbers in order to “pump” real estate and other tinfoil worthy tactics.

Garth, you should just start publishing IPs and MAC addresses along side posts so we can see which posters are simply responding to themselves.

#186 Unhinged Loon on 04.12.16 at 6:55 pm

Someone explain to me how allegedly domestic buyers are capable of generating the incomes to support 1.5-2 million dollar mortgages.

How many jobs in the YVR pay a salary of more than 150k?

There is a pretty big discrepancy in the numbers here Garth.

The median property price is not $1.5 million. — Garth

#187 The Great Gazoo on 04.12.16 at 8:03 pm

US DOE Energy Information Agency is forecasting US domestic oil production to decline from 9.18 million barrels of oil per day in Jan to 8.11 million barrels of oil per day in Sept of this year, see table 4a.

This represents a 1 million barrel per day decline in only 9 months. Pretty significant decline if you ask me! This figure does not include declines in production from around the world due to massive capex cuts we have seen.

http://www.eia.gov/forecasts/steo/

On the demand side, the International Energy Agency is forecasting world oil demand to grow by 1.2 million barrel per day.

https://www.iea.org/oilmarketreport/omrpublic/

Many other organizations forecasting higher demand figures, but lets be conservative shall we. So 1 + 1.2 = 2.2 million barrel per day change in supply demand balance – just from these two items in 2016.

No wonder oil is heading higher.

#188 Fed-up on 04.13.16 at 2:57 am

#146 Willdaman on 04.12.16 at 11:40 am
————————————————————————————–

Well said on all points and I completely agree.

Except that there is nothing “soft” in value about laying down roots and becoming part of a community where you can raise your family and remain close to those that you care about, while still holding down a decent job without commuting 4 hours per day. This is what made my upbringing in Toronto’s East York a very happy and secure one. My father did this comfortably on a working man’s salary.

That is now a distant dream for those with less than a $300K annual household income. It is absolutely sad and tragic that this basic fundamental urge, so easily achievable by almost anyone only a mere decade ago, is now an impossibility for most. Doctors and professionals finding most of YVR and many parts of the GTA unaffordable…well done Canada, well done.

But we have been told to stop whining and to do something about it. I’m really not sure what exactly that is. Magically triple our net worth like house buyers have in the past 10 years with balanced investing when we can’t even pull 5% out of the markets as of late? -5% the last 2 or 3 years is far more accurate.

No one is whining, just stating the irrefutable facts as they are.

#189 Fed-up on 04.13.16 at 3:06 am

173 45north on 04.12.16 at 3:10 pm

to go back to Fed-up: Does anyone here seriously believe that local buyers, foreign buyers and speculators will all arbitrarily head to the exits at the same time

reminds me of the story of the man caught out in the forest during a rain storm. He went under a tree to stay out of the rain. Someone asked him what he was going to do when the rain dripped through the tree. He said “I’ll go to the next tree”.
——————————————————————————

Indeed.

#190 Snowboid on 04.13.16 at 5:29 pm

#185 understood by few on 04.12.16 at 5:29 pm…

Sorry to disappoint you, but I have no idea who VREU is – but I do know that what they are posting matches the experience I have with Victoria real estate.

But I wholly agree with publishing those who post under multiple names using the same IP. Not sure how much work that is, but I’m sure one of the esteemed professors’ Amazons would be up to the task.

BTW, the figures I use to show that Victoria prices are still far behind 6 years ago are easily verifiable – I get them from VREBs own published stats.

And finally, I have always posted under one name on this blog – it’s never changed – and the professor can confirm I’m currently posting from the Valley of the Sun (and VREU isn’t).