Monday, December 11, 2006

big shoes




So VHB is on holiday, and the pope, Rob Chipman and I are trying to fill his shoes. That's some big shoes to fill. VHB does a lot of research, and his reasoning tends to be sound. Commentators at his blog flesh out the arguments posited, and we are all enlightened - no matter whether bullish or bearish. This blog has benefited from VHB's readership since he so kindly directed you here during his hiatus.

I am just having fun. I like writing. I like playing with photoshop. My views are based on my own common sense, and passing knowledge of history and human psychology. Statistics and facts are just static in my slushy mind, so this is merely entertainment.

I got an e-mail from someone at the Financial Post this AM requesting an interview on my "thoughts on the outlook for future prices." While I am flattered by this request, I do not know that I am qualified to elaborate in such a way. I will contact the journalist (I am a courteous person), but I thought that I would give you all a chance to put forward your own views.

So, in honour of VHB's regular "ask VHB", I am asking you to "tell solipsist". I will take what you say, and my own thoughts to the journalist.

What are your thoughts on the outlook for future prices? What is your rationale? This may be redundant, but that's what this blog is - redundant prolix.

26 comments:

Uncertain Buyer said...

You can tell him that there are serious buyers out there who are waiting for the market to decline before they make their purchase.

Not all of us are caught up in the RE Media Spin that this latest appreciation of Home Values is justified.

Uncertain Buyer said...

My rationale for this last jump in prices is due to consumer being caught up in the "Hype" of it all. We were all told by these, "RE Experts" that homes will always appreciate and we would be priced out of the "Market". Along with being scared, the excitement of being able to double your money in a few years has led a lot of people to over extend themselves. Where else can you make that kind of money??

People love easy money. People will always listen to people that tell them what they want to hear.

ReductiMat said...

Tell him to tell my carrier dude to ease up when he hucks the paper at my door.

All my Rennie ads go flying and make it hard to reassemble for later consumption.

Anonymous said...

I am putting my money where my mouth is. I sold my big house on the Westside in September and will not buy until the Spring, to take advantage of what will clearly(likely) be a buyer's market.

Anonymous said...

Before buying anything I always ask myself:"it is worth the money they ask for?". When it comes to housing in Vancouver, the answer is "definitely not". I do not look for easy money. I just need a roof over the head of my kids. I will rent that roof until prices go back to a decent level. And no incentive will make me change my mind. I won't give away my freedom, my good sleep and my happyness for the sake of owning a wooden box with sidings.

paulb said...

Real Estate is not a good risk anymore. We have price increases in many areas over 100% in the last 5 years. Even if the market continues to climb next year, knowing what we know know about market cycles, slowing economic conditions and a looming US recession... the upside is shadowed by the downside.

The 4600+ condo units that will be completing over the next year could fuel the flames of the condo crash in Downtown Vancouver.

Sell yesterday or hold long term!

solipsist said...

Thanks for your comments folks. Keep 'em coming

reductimat - I will pass on your request. Boiled-but-Runnie might be interested to know of your frustrations with the reassemblage of his pap too. Just checking my rolodex for his number....

patiently waiting said...

4600 new condos? Wow, no kidding. Is that in Downtown Vancouver or all over the Lower Mainland?

For me, the story that should be covered is the crappy situation for young families in the last few years.
You can't escape it. Even if you're smart enough to rent, you have to deal with the instability and landlord BS. If you bought, welcome to years of pain.
I heard someone say Vancouver has been unaffordable since WW2. That's a lie. Many of those million dollar post-war bungalows were once occupied by regular families supported by one average salary.
The housing bubble has torn the social fabric of our city to shreds.
And now here comes the CHMC to make it worse. Please bad-mouth the CHMC.

paulb said...

Yup that's only Downtown. Here is the chart from VHB.

http://van-housing.blogspot.com/2006/01/supply-watch-january-2006.html

sorry dont know how to set up link

Anonymous said...

I am surrounded by VERY frustrated families. I am talking about couples with an income of $90,000 to $150,000,2 to 3 kids, that can hardly buy a 3 bedroom condo in their neighborhood b/c they refuse to go for a ridiculous 30 years mortgage to live in a frame building that will leak before the end of the mortgage. They spent 8 years at school to get a PhD and now they cannot even buy a crapy condo... Makes you sick and look for jobs on the East Coast!

Will one day white collars squat empty buildings too?

patiently waiting said...

Yep, lots of jobs go unfilled because workers can't afford to live here. This is undermining our economy. When the bubble bursts, we'll discover what little wealth there really is in Vancouver. The wealth that used come to Vancouver from the hinterland is now bypassing us and leaving the country. Also, retiring babyboomers are going to leave Vancouver - that's right, leave expensive, over-rated rain town - for some place cheaper, probably where they grew up.

paul b, I'm telling everyone I know about that just to watch their jaws drop. I notice on Craiglist that the smallest Hudson condos are renting for $1200, down from $1500 a few days ago. By Spring, I bet they'll be under $1000, perhaps somewhat lower.

solipsist said...

Waht do you think of this idea?

I think it would be better if you copy/pasted a paragraph, and provided a simple link.

I don't know if anyone is interested, and it's a long scroll to the end.

Further, it has no relativity to Vancouver.

Anonymous said...

Why not move to the east coast or the states?

solipsist said...

Why not move to the east coast or the states?

Why? Don't you like me?

Gianni33 said...

Richmond. 2 bedroom rancher in 16,000 sq ft lot. Quiet Street. Near No.5 Road and Cambie. Presently rented $1200/month. Great investment for future development.
Asking $619,000. No realtors please. ph: 778-882-5051

http://vancouver.craigslist.org/rfs/247379270.html

can someone do the math for me? How is this a good investment @ $1200/month? What kind of down payment would you need? I can see the lot is huge, but I doubt builders are starting any new developments in the near future.

Anonymous said...

I ran the Rent vs Buying simulator 100 times to try to understand who could still be willing to buy in that market and could not find any sensible answer. But is there any? Where are we heading with an average saving of -8%? Is debt going to snowball until...

Michael said...

My wife and I bring in about $150k per year. We refuse to live in a Vancouver Special in East Van with people shooting up out front. If we move back east we can both get jobs that pay the same or more while actually being able to afford a home. We are going to give it until the spring and then start to look elsewhere. We know three other mid 30's couples with young children in the same situation. If housing continues to move up I suspect you will start to see an exodus of the people that should be driving the economy (not to mention a doctor shortage).

Anonymous said...

Ditto here, Michael. I am 35 my partner is 33, and we have two kids aged 9 and 7. My partner is doing graduate work, and I alone make 130k/year. We have no intention of staying once she has completed. It is just not sensible. And amongst our friends, the majority feel the same way.

Catherine said...

Hi Solipsist - Good to see someone taking over for VHB!
My new ECONOMIST has an interesting article p. 79 The Economist Dec 9th 2006. If anyone knows how to link it here, please do. Salient points:
Canada is #3 in terms of YOY % rise in house prices.
Morgan Stanley analyst David Miles says, in discussing British prices that "a lot of it is speculative. Between 1/3rd and 1/2 is due to increased expectations of house-price inflation. These amplify the effects of other factors. Faster increases in prices foster the belief that future increases will also be stronger....(which) suggests that the current level of house prices may be rather unstable."
Yes. Rather unstable. That certainly covers Vancouver too. We're the hottest of an overheated national market.
RE: Those raising young families like I am: I am happily renting even with a child to raise. I've realized that I am not doing myself or my kid any favours by spending 3-5x as much on mortgage as my rent would be.

Uncertain Buyer said...
This comment has been removed by the author.
ken said...

Interesting to see the comments about leaving vancouver. I'm in a similar situation and unless something major changes will probably be out of this city within the year.

How long until the majority figure out that debt does not equal wealth and that an overvalued housing market could be a big negative for our economy?

Anonymous said...

There are still many affordable places to live in the lower mainland but from the sense of these posters. e.g. I won't live on the eastside crowd, they are limiting their search. Too bad folks a single family home on the west side is out of reach for first time buyers.

solipsist said...

e.g. I won't live on the eastside crowd, they are limiting their search. Too bad folks a single family home on the west side is out of reach for first time buyers.

I didn't notice any "crowd" saying that they would not live on the East Side. One mention of Van. Specials and crack, but...

I have lived in East Van. for 18 years. I prefer it to the West Side, but there is little worth the asking price anywhere in this city.

The fact is that even in East Van., the median income would have trouble paying for a house (SFH anyhow).

Anonymous said...

"we refuse to live in a Vancouver Special in East Van with people shooting up out front" This sounds like they believe that all of East Vancouver is just junkies and specials.

solipsist said...

This sounds like they believe that all of East Vancouver is just junkies and specials.

Fair enough. If they do believe that, it's their loss IMHO.

The funny thing is that so many came from the West Side because of affordibility constraints there. It drove up prices on the ES. I remember at one point (maybe around 1996) that prices were comparable on the WS to those on the ES.

All it took was a magazine article about how hip "The Drive" was (I forget the name of the mag. It was one of those hip sub-culture Gen-X affairs that I'm not hip enough to read.) to begin it's downfall. The BMW's, Jags, and Porsche set began slumming it on week-ends, and it was slowly gentrified.

20 years ago it was an affordable place for artist and musicians and such to live (so was Kits), but now it has million-dollar houses. Most of the artists are gone. I still like it much better than w. 4th though. There were lots of weed-smokers around, but no problems with break-ins and petty crime. Most had nothing much worth stealing. As the money started to come, it attracted the junkies because there were richer pickings.

I don't live near the Drive any more, and these are just my observations of living there for about 12 years.

Anonymous said...

I too live in E.Van and love the neighbourhood where we rent (Burrardview). However, houses are very expensive and there are very few townhomes (we need at least 3 bedrooms). I don't even look at anything on the west side anymore, as it is completely out of my price range. I like Vancouver, and I really want to afford to buy here, but if I can't afford to enjoy what the City has to offer than there is not really much point in staying. I am hoping for a correction, and believe that the fundamentals are out of whack. However, it may just be wishful thinking as prices have alway been relatively high in comaprison to other Canadian cities.

On another note, I recently read an article regarding City Affordability based on land-use regulation, and that the cities that are the most regulated, have the highest property values. Vancouver is one of the cities mentioned that is severely unaffordable and also has highly restrictive land use policies...Check it out here:

http://tinyurl.com/y6uhoa

-jason