Friday, May 09, 2008

qui en savait?



When I first arrived in this fine burg 20 years ago, I thought that houses were a good deal. I wanted to buy an old Victorian fixer-upper, but I just could not qualify for financing. So I peregrinated, and thought, and dreamed, and had many wild and wonderful experiences. I have not peed away too much in rent, because often I was paying a dollar a night or less for a bunk in a cattle shed in Guatemala, or such. Sometimes it was $500 a night at Raffles in Singapore, and over-priced Singapore Slings (but just one night, and just one Singapore Sling).

10 years or so ago a friend expressed envy of my life style. I pointed out to him that he had a beautiful house, and a beautiful wife, and three beautiful children, while I had a ruck sack and a passport, and a girl friend who shared my need for freedom.

My friend has since divorced, has signed over all equity in said beautiful house, and continues to pay child support.

I know lots of people like him, but I also know people who bought places when prices were still reasonable, and cashed out with a couple of hundred Gs in tax free profit, and they have no alimony, and now they are traveling in style - Raffles every night...

Over all, none saw what was coming. I thought that the top was in circa 2003 (and thought that it was an insane top), and refused to pay the price. Would I have if I had known that I could make a few hundred? Probably.

But who knew?

Now we seem to be seeing the beginning of the end. I'm too weary to call it yet again, but new listings are soaring, and the for sale signs that I see are hosting moss.

Is anyone even interested in RE any more?

Yawn.

17 comments:

Anonymous said...

Over all, none saw what was coming.

That's what happened, Sol.

I never guessed they would blow a credit bubble so huge that it'd blow society off the map. I under-estimated the depravity of banksters.

It's not as if anyone couldn't forsee the financial debacle that RE would become; it's been obvious to me since 2003...but, I'm a slow learner.

Who's interested in RE anymore? I dunno, but perhaps it's time to move on with life and not aspire towards a lifetime of debt serfdom.

I can walk away from Vcr RE lunacy. Lots of people already have.

markoz said...

Who's interested? Me, for some inexplicable reason. I remember about year or two ago, I posted, on one blog or another, that real estate prices were so extreme that even if there were a 20% correction I still wouldn't be in the market. I said that, as a result, I would no longer be following the blogs since there was no purpose. I allowed that I might check back once in a very long while just to see what was up. I lied. I read these blogs every day twice a day. My teenage daughter even asked me the other day why I was always reading about real estate. I mumbled something about crashes and peaking markets etc. I could be using my time to learn more about Photoshop or get more exercise, but no. It's a twisted obsession that I can't seem to shake. Argh.

Many Franks said...

Interesting thread! More anecdotes?

I went into university in 1998, and didn't finish until 2004. Through a combination of hard work and good timing, I was able to finish my degree without going into debt or even flattening out my savings. (I often worked days and studied nights.)

It's possible that I could've gotten a mortgage (with my parents' help) in 1999 or so; we discussed it but didn't go further than that.

Since graduation I have been watching the RE market casually. I have been working and stacking away money for when the time is right ($70K or so ATM), but it currently isn't -- I can't justify current prices.

The loss of flexibility that comes with (condo) ownership would also be considerable, and my cost/benefit has to take that into account. In the few years since graduating, I've lived in Prague and Bordeaux; I've worked on an olive farm near Nice; I've cycled across Europe; I've been to Brazil, Ghana, and Nepal, with everything here packed up into a storage locker when the trip was more than a couple of months. It's been wonderful.

For the metrics to make sense for me:
1. I'll need to be able to travel occasionally (i.e. not so mortgage-enslaved that I can't disappear for a month).
2. I'll need the rent-vs-own comparison to make some kind of sense, which it currently doesn't.
3. My mortgage term has to compare to my length of ownership, i.e. no 40-year amort on a 3-year condo stint.
4. I will *not* follow a crowd, and with RE coming off its status as the #1 obsession, the time may be coming.

I was in the thick of Vancouver's dot-com boom and bust, and while I can't say I predicted the shape of this RE cycle, this all feels very familiar.

I'm tired of the responsible-owner-versus-footloose-renter comparison. It's a straw man and we are capable of saving and watching and waiting. In 8 years I've spent approx. 32K on rent and I don't regret a cent. I'm confident that there will be a window to buy that makes sense, without all the flip-this-condo and buy-now-or-else hype.

MF

solipsist said...

I under-estimated the depravity of banksters.

And a Finance Minister who approves 40 year amort.

I can walk away from Vcr RE lunacy.

I think that I have walked away philosophically. I might buy something when it makes sense, or I might just move to Buenos Aires.

My teenage daughter even asked me the other day why I was always reading about real estate... It's a twisted obsession that I can't seem to shake. Argh.

I know what you are saying. I think that many of us are so afflicted.

I'm confident that there will be a window to buy that makes sense, without all the flip-this-condo and buy-now-or-else hype.

I agree multifrank.

When I think of it objectively, my travels and experiences are worth far more than a couple of hundred thousands of dollars not realized.

The onerous mortgage is a soul-killer, while world experience is soul-expanding.

Ones mileage may vary.

Strataman said...

solipsist "When I think of it objectively, my travels and experiences are worth far more than a couple of hundred thousands of dollars not realized." Right on guy! Now I am in my late 50's and working, a lot of my "peers" are retired. Talked to a guy yesterday goin for a mountain adventure (guided) he knows I'm interested as I did so much of THAT while he was making money. No regrets no matter what money he has now and I don't he can never just take 5 years in the prime of health and adventure out and challenge life. To me that was life! Time to work steady and be conservative is when you have done everything not the other way around when it is way TOO late.Realestate? Well basically it's irrelevant in any time frame of a lifespan, of no importance and totally dependent on the whims of politics.Nobody in this world owns sh**t never will. It's actually dependent on the government of the day, is a legal paper created by a government that didn't exist 100 years ago and won't exist 100 years from now.

Anonymous said...

Another anecdote...

In my younger days I too took my backpack and travelled for months at a time, took 4 years (between travels) to do an MA but after a bad break-up in 1998 decided it was time to re-assert my independentness & purchased a loft in Gastown.

I managed to live there about 10 months with the drug addicts and the insanity then decided it was time to dust off my backpack and head to Asia. It wasn't as simple this time though, I found I couldn't sell the loft without losing a bunch of money (which I wasn't interetsed in) so I became a landlord. I subsidized the rent a little at first but when I got my next tenant 8 months later I was making enough to cover mortgage & maintenance. When I finally was able to sell the place in 2003, I made enough money to pay off my student loans and other debts, send my parents for a vacation in France & bank about ten grand. It was not crazy money by any means but I was pretty happy with a $40,000 profit after 5years.

I did look at buying something else at the time but found the prices insane. The woman who bought my loft in 2003 did some renos (added a bathroom) and sold the place for twice what I sold it for (she made about $200,000) in 2006. If I knew then what was about to happen...

I am now married and renting a place for half what the mortgage would run us. We dream of a little cottage somewhere and are trying to save to realize that dream when prices drop a whole lot. We are happy to keep renting in the city as long as it makes sense.

We also talk about moving to the east coast, although we do favour Hawaii...

mk-kids

patriotz said...

The main reason I follow the market closely is that due to the bubbliness of RE in Vancouver/BC, buying only makes sense at market bottoms, and we've seen only two since 1980 - in the mid-80's and around 1999.

Now maybe this is the final madness and due to a number of reasons (summed up by Garth Turner although originated by others) RE will enter a period of long-term stagnation and one will be able to simply buy a house when one needs it, like it used to be before 1980. But who knows.

I'll be happy to buy a house in the future, but there is NFW I'm buying until the yield (value of accommodation) is comparable to other investments. I have better things to do with my money, and there isn't a special place in heaven for those who have their names on a deed.

Anonymous said...

for dreaming of the east coast, why not check out our own Sunshine Coast.
We sold in Dec. 06 and didn't make the BIG money, but did okay. THen we bummed around for a year and bought a lovely 50 year old house with a seaview, a shed, 4 bedrooms and a garden. We popped a new roof on it and thank goodness every day we get up.

I work once a month in Vancouver and fly down to do it. Mr. only does a bit of work here and there.

We are at that stage where we have some cash, but it helps when you can buy a home for less than the price of a studio apartment in Vancouver.

seeker said...

Markoz,

I laughed guiltily when I read your teenage daughter's comment. I have to drop three kids off at three different schools so my 12 yo is often trapped by herself with me in the van for a bit. Somehow realestate came up (as usual when I see someone tearing down a perfectly good house to build a fresh eyesore) and I proceeded to give her the supply/demand/interest rate/crashes are acomin' blather. Not sure if she glazed over, she's a polite kid.

Obsessed?

patriotz said...

I have to drop three kids off at three different schools so my 12 yo is often trapped by herself with me in the van for a bit.

Have to? I walked over a mile to school even when I was in kindergarten. Rode my bike later on when weather permitted.

And there wasn't any public transit where I grow up.

solipsist said...

Nobody in this world owns sh**t never will.

strataman - some do, just not us plebes. We are, by and large, owned. Most are just not aware of it in the Dream.

mk-kids - no mis-spent youth on your books. Way to go.

As to the East Coast, I'm no expert, but the weather there seems abonimable as of late. But 3 degrees in St. Johns the other day.

I have a friend who moved there a few years ago, and I got an e-mail from her the other day, and it sounds as if she ought to have moved to Happy Valley instead. She is not so happy in St J's.

a period of long-term stagnation and one will be able to simply buy a house when one needs it, like it used to be before 1980. But who knows.

patriotz - I would tend to agree. I suspect that it will fall for a while first. Crash over crash, and just when it seems to be the end, a sucker rally. Rinse and repeat.

I think that we have bigger things to think and worry about though (more on that sometime - it is way off-topic). We have all survived this insane boom, and we will flourish when it crashes.

it helps when you can buy a home for less than the price of a studio apartment in Vancouver.

Especially a real home!

Not sure if she glazed over, she's a polite kid.

She probably had her I-Pod cranked up with wireless ear buds.

Anonymous said...

We are happy to keep renting in the city as long as it makes sense.

We also talk about moving to the east coast, although we do favour Hawaii...


And then Sol mentions Buenos Aires :)

We're going to check out an ex-pat community in Mexico.

It doesn't have the beautiful weather that Vancouver has, nor the ancient history but we'll probably struggle through.

seeker said...

Patriotz,

I would love to be only a mile away from schools. The kids are all in French immersion and none are close to home. So I maintain my want a house close to school obsession but refuse to pay these prices.

And while we're on the subject of what I'd love, how about a quality local school? I've had friends pull their children out of the English stream b/c they felt their kids were being discriminated against b/c they COULD speak English. If my children weren't in FI,I wouldn't have them in the schools they're in.

Just a reality in this city.

Mathematical said...

As many of you I have spent my fair share on blogs and websites. There are days where hours have gone but I think it's only been minutes.

But I do feel I have gain a lot of knowledge in doing so. That's one way I justify the time spent. It still blows my mind that people are still buying places at today prices.

Well I believe there is hope for us all.

Anonymous said...

Regarding spending too much time on real estate blogs. I used to see a guy sitting at his computer by his window all the time. My girlfriend used to tell me that "he's probablys one of your weird real-estate blogging friends blogging away. you probably post messages to each other and don't even know it."

The image of all these sad little men sitting at their computers in their underpants blogging furiously about the coming crash made us laugh.

Anonymous said...

Ha Ha, the jokes on you - I don't were underpants!

solipsist said...

I'm commando myself (the secret to longevity is "baggy" trousers).

Can't say that I'm sad, or little either (I'm 6'2", and have an athletic physique).

At least we are not obesessed with kiddie porn, or gambling. Always look on the bright side!