staying the course?

I stayed the course. I didn't sell anything on the markets this week, even though I have been tempted to do so for the last year. There was a free-fall this week, and then some wacky correction type action today. Volatility is not good. No one really knows what's up.

BCE has a sale agreement with the Ontario Teachers' Pension Plan for $42 something a share, yet BCE is selling for about $32 right now. OTPP says the agreement stands, and it is staying the course. The Big Banks are offering discounts on new shares releases too.

The US gov't is staying the course with crazy attempts to stave off the inevitable recession until that little redneck GWB is done in the WH. I guess he is trying to protect his legacy of fucking up anything that he touches.

What about you? What course do you see ahead for yourself, and for the larger world?

how low can she go?

I've been up to my arse in alligators, hence the lack of pies.

I stole the image below from Garth Turner's blog posting Pop Heard Around The World. (don't think that he didn't lift it from somewhere) Politically, he's...well anyway, he is telling it like it is vis-a-vis the economy, and some of the comments are good too. It's kind of like wading through comments at Rob Chipman's , but there is stuff worth reading.



Look at that down slope. Pretty steep. And the timeline - aren't we "two years behind the US"?

This is it. The Wile E. Coyote moment has passed. How about that 600 point drop on the TSX today? And the 900 points off last week? That is some 12% down in seven days. My stock list is a sea of red - except for the ones that have Halts on them :[

Oil down below $90. the CAD below .97. Quebecor up shite creek in a lead colander.

Some are talking about TSX below 12,000, try below 10,000. The rout is global. Look for 8700. Then buy. Rinse. Repeat.

Oh, and house prices? How low can she go?

I know that we are immune to everything, elsewhere, but I am in Vancouver, and I'm watching my stocks go down. And I thought that I was different. It's so great to be living down a rabbit hole in The Land of Oz.

Here is some light reading at the Gloom and MarketCrash

And just to round things off -

i'm not the only one...

I could not resist, and took drachen's suggestion for the pic'. The original was intentionally boring, but maybe just a bit too much so.



I read a couple of things worth reading over at Garth Turner's blog, which I have redacted below. (some of the commentary is good too - if you can get past the masturbation)

Whatever one might think of Turner the politician, he does know a fair bit about finances.

In any case, don’t let the media fool you. Stock market stories are not about stocks. They’re about the economy. Markets, you see, are harbingers. People who trade on them spend a lot of time betting heavily on what comes next. Right now, they’re worried.

The world economy, dragged down by the States, is slowing. America has never been so in debt, or so long at war, or with such a weak currency. And on a day when realtors in Canada were trumpeting the greatest sales volume ever for residential homes...far too many buyers here could be in as much trouble as a couple of million of Americans who losing their houses. We...categorize the subprime mess as giving loans to people who did not deserve them. But...we are busy selling $400,000 homes to young couples with between 1.5%... and 5% down, and with 40-year mortgages that turn a $300,000 debt into one of $884,000 at current rates.

This is unwise. It’s gambling. Canadian banks have been handing out mortgage loans like candy... offering a zero-down option, asking them to come in with enough money only for closing costs.

No wonder Bay Street’s worried. Nobody in the world of financial securities would extend 98.5% leverage, and yet we are soothing your homebuyers into precisely that. Should the US slowdown affect our economy, which it will, buying an expensive house with no money might not look like such a great idea.

This was worth quoting too;

Like the North Star, we are a bright light for others to follow. Canada has emerged as a shining example in an economic universe of rapid change and uncertainty. We are leading the way with our tax cuts, our debt reduction and our focused and responsible spending. Our fundamentals are strong and we are well positioned to weather any sudden economic storms.
- Jim Flaherty, budget speech, October 30, 2007

“There’s reason for continuing concern about the weakening in the U.S. economy. The subprime reality … continues,” he said. “It’s broader and deeper than originally predicted and it’s reason for caution as we look forward.”
- Jim Flaherty, interviewed in National Post, January 2, 2008

In the sixty-odd days between those two comments, what happened?

The "experts don't know WTF is going on. You and I know better than the Federal Finance Minister. That's what freaks me out...

the quickening

There is a lot going on these days, despite the "roaring silence" that has been for a while. drachen linked to this video over at mohican's place. The collapse of the US dollar and economy, and perhaps US society? They are going down, and we, and a good part of the world will be going down with them.



Mike Mc sent this link from July 28, 2005 warning of a bubble in Vancouver and Victoria (thanks Mike). That was 2 1/2 years ago, and things have continued to inflate since then. It is now so out of whack that it has become like a lost chapter in Through the Looking Glass.

Today we hear that the Provincial Guv'mint is talking about a roughly 14 billion $ transit initiative. Just tack it on to our property taxes on top of the infrastructure costs for the boondoggle. I mean, Olympics.

Meanwhile, Surrey NDP MLA's are calling for Translink to roll back the latest transit fare hike.

"You can't have someone who makes $8 an hour have an increase in a fare and end up paying something like 18 per cent of their income on transportation. It's just not fair."

Too true. After coughing up 71% of income for mortgage payments, and 18% for transit, there will be a scant 11% left for food, entertainment, clothing, retirement savings, property taxes, up-keep, etc. Does anyone know if those percentages are net of tax?

Stephen Harper announced a billion dollar fund to help displaced workers in the manufacturing and forestry industries.

The rising Canadian dollar and an economic slowdown with Canada’s biggest trading partner, the U.S., has forced many mills and factories to either let workers go or shut down completely. In response, the Harper government has announced a plan that is not only ludicrous in its approach but politically underhanded as well.

I guess Stevie is worried. But a billion bucks is not going to cut it once things really get going.

The sell/list ratio over at Rob Chipman's place has gone from 200-odd % before Xmas to 30-odd %, and we are not seeing regular #'s there these days. (some might say that the Chipper is withholding because the #'s are grim. I don't buy that, but if the #'s are grim, who will be surprised - besides the greater fools?) Seasonal, or harbinger?

I had a whole bunch more interesting links, but I will not travail you with them now. The shite is hitting the fan in dribs and drabs, but it is quickening.

slo' mo'

I was going to post otherwise, but serendipity led me to this video.



I think that it is demonstrative of what has been going on here in the Vancouver RE market. First, the predator (VANOC?), then the scared silly goose (panic buyers?), and finally, the balloon popping in slow motion.The balloon popping is exquisite, and has an unexpected action.

I like how the guy takes a bath at the end.

the bubble book

I bring you some levity in this time of alarm bells ringing from the south. Maybe I am just hearing spooky, dis-embodied voices in my head, but I don't think so.

Back to the levity - li'l solipsist has a book for the bath called Bubble Book, and I was inspired to take a little artistic licence with it. I re-wrote parts of it, and of course, had fun with Photoshop. Enjoy.


Young James has noticed that there are several housing bubbles outside. He begins to worry. Young James has bought beyond his means, and is beginning to understand.

Little Lucy snickers as she realizes that Young James has not noticed her Rennie The Raptor poster. Well, duh! she says.


Learnin' Lenny is doing his sums. He differentiates between mortgage payments and rent payments while Young James the Reformed explains the idea of compound interest. "Much better to earn interest than pay it" he admonishes. Learnin' Lennie wonders if Young James the Reformed has heard of market cycles. He also realizes that his $1000 bills stuffed into a soup can up on the shelf are earning no interest.


Young James the Reformed invites Scared Silly Sally out for a walk while he posts his mortgage payments. She is very worried about being priced out. Young James the Reformed begins to hatch a scheme in which he sells his place to Scared Silly Sally for "2008 prices". Scared Silly Sally has never heard of compound interest, but she thinks that maybe she is not priced out forever - what with the new zero-down, 50 year amortized mortgages (I'll be paid off by the time I'm 60, she ponders excitedly).

Stay tuned for the next exciting instalment - It's Just Bubbles Down the Drain.

canned goods & ammo

I have had a few people write to ask me what I do with my cash while waiting for a correction. Frankly, I do not know what the heck to do with it. Stuff it in my mattress? Hide it in plain sight? Good question.

My response has been that I am very conservative with my capital, and because it is so hard to come by, I keep it in the bank - either in GIC's, or these days, in a "high" interest (4%) savings account at a big bank. I have had the option of putting it into market-linked GIC's, but stayed with the staid old cashable GIC.

So, I am making 4%, but factor in inflation (supposedly ~3%, and income tax on the earned interest, and I am not really getting any further ahead. I could gamble with ABCP, oil futures, pork belly futures, precious metals, the stock market, or the casino, but those are not guaranteed safe havens. I sure could have made money in TSX-linked GIC's, or gold, but I also could have lost money. I could have bought a few pre-sales and made money too (if I bought 3 years ago, and sold this past summer, I would have done well), but I also could have lost it all (I have been expecting a correction for a while...).

What are your safe havens? My 4% earned does not add up to a hill of beans.

taxes & interest

In the last post, Larry questioned whether our savings from renting over owning were net of tax. I found it an interesting question, as I've never really thought about it, so I did.

Firstly, the principle of savings is tax free - the money itself is not taxed, but the interest is. The tax on the interest would be relatively little. Putting aside appreciation in my example, we still saved more than we would have paid on the principle of the mortgage. Then there is the thirty odd thousand that we would have paid in interest. We make about $500/month in interest on our capital, so in the last 3 years we have made about $18,000 on that, less maybe $5K in tax (to be honest, I have never paid any attention to what percentage I pay in taxes, but it doesn't seem any where near 25% of gross. I don't really mind paying taxes, as long as they are spent wisely. They seldom are, but I don't have to pay thousands of dollars a day to stay in the hospital, and Canadian universities don't charge 30-40 thousand a year for tuition, etc.). Add that $13K to the $24K in rent/own savings and we are up at least $37K.

OK, I have to address the appreciation. I thought at the time (2003-2004) that prices were due for a haircut (as did many of you). I was wrong. But what if prices had retreated by 10%? There would be no appreciation, and that $400K house would be worth $360K - maybe less because of it's problems. The $18K in principle pay down would mitigate things a bit(?), but... There would also have been about 6K in property taxes over that time, plus PTT, agents' commissions, etc.

Then I thought, wouldn't that $30K in interest paid be a kind of taxation in the truest sense of the word?

Oh well, I have always recognized that you have to spend money to make money, unless of course, you are a money lender. Then you get your money for nothing, and your chicks for free.

I take some solace in the idea of a 50% correction, which would put that house back to about $350K. Our down-payment will be bigger, and our mortgage will be smaller.

what if?

Back in 2004, my wife and I felt that we had enough of a down payment (better than 35%) to buy into what we thought was an outrageously over-priced market. Problem was, we saw very little that caught our fancy, and what we did look seriously at were all involved with bidding wars. I thought to put an unconditional, full asking offer on a character house that had obvious issues, but my agent suggested not to bother. It went for $150K over.

So what if we had been reckless, and got the place? It needed foundation work, modernized plumbing and wiring, a new heating system and a new roof, not to mention windows and what not. I could have done a lot of the heavy-lifting, but it still would have cost at least $50G's that we did not have. Second mortgage? The first mortgage, including property taxes. would have been $500/month over what we were/are paying in rent. We would have had some tough months even without a 2nd mtge. Doing the work mostly myself would have been a few years' project in itself. Looking back, I'm glad that we didn't, because we would have been buying at our margin, and at the time, I thought that a turn-around was probably imminent. Appreciation was far from my mind.

I guess I was wrong about the appreciation, the place is probably worth $700K now. Maybe more. We missed out on a couple of hundred G's. That sucks. At the same time, we had a kid, and our income has dropped a bit, so we might be a bit uncomfortable now.

There are certainly intangibles to owning, and I wondered what those might practically be. Starting with interest rates: we were approved at 4.2%/5 years. If we had taken a 3 year term and had to renew at today's 5.79% or there abouts, we would be priced out and would have to sell. Mind you, we would walk away with a nice chunk of change, and go travelling for the time it takes for fundamentals to return. I would have gone for 7 years at a slightly higher rate though, and would be sorely tempted to cash out. Ooops. I forgot about li'l solipsist. I guess we would be locked in... But, as of December 07 we would have paid down $18,174.81 in principle, and $30,102.78 in interest. Instead, we have saved over $24K in the difference between rent and own, and we have been making interest instead of paying it, and I always feel better about that. And then there are those pesky repairs and maintenance, and increasing property taxes. But oh, yeah, the paper equity.

Bottom line is, I don't really have any regrets. It was over-priced.

happy new year!

Here we are at the eve of a new year. It has been a good year for me, with the arrival of a bundle of joy, and the accompanying patter of little, bare feet. The RE correction so long anticipated has not come to be realized, but, oh well. Maybe in 2008?

I would like to interrupt myself here to thank each and every one of you that have made this humble little blog a continuing interest and joy for me to write. Over 190,000 hits in the last year. So much more than I could have hoped for when I undertook the production. Thank you for sticking with me when I have under-produced, ranted, and occasionally been snarky. And thank you for the decorum exhibited through it all.

I hope for the very best for all of us, everywhere - bull, bear, ambivalent, home-owner, renter, homeless, but I do hope that all the specuvestors get burned (just kidding...sort of). I believe that we have huge challenges coming to us in the near future.

I picked the picture above because it seemed to have many pertinent elements - a sign warning of a fork in the road, a character (specuvestor?) with a target on his hat, and a generic, uninspiring metro backdrop.

trotter made a few predictions in the last post, which I will bring over here to open up the commentary. Feel free to post your own predictions, rants, kudos, kvetches, etc.

I predict a steady slide in prices beginning in February/March, much hand-wringing and recriminations, a few bank collapses, a stock market crash, and my own committal to a nut-house near you.

Have a happy, healthy New Year. My resolution is to be a bit more regular in my postings.

Let the prognostications begin!

on the ball? or, the sky is falling

I read this commentary on the MSM (our favourite, biased hobby horse) over at the Republic. The last line says much.

So what happened?

Headline in The Globe and Mail, Monday December 3, 2007: “Chevez suffers stinging referendum defeat.”

Headline in The National Post, Monday December 3, 2007: “Chevez heading to referendum win.”

Headline in The Vancouver Sun, Monday December 3, 2007: “Chevez concedes defeat in Venezuelan referendum.”

Headline in The Wall Street Journal, Monday December 3, 2007: “Chevez headed for victory in Venezuela, exit polls show.”

Headline in The New York Times, Monday December 3, 2007: “For Venezuela, tensions mount with close vote.”

Surely a case of corporate media telling the story they want you to hear before telling the story that was.

page link

the grab bag reprised

William Sauder, formerly of Interfor, and the philanthropist who with a gift of $20 million funded the founding of the Sauder School of Business at UBC, has died. He was 81 years old.

The Sauder data has been the go-to source for RE information for many commentators on RE in Vancouver. The death of Mr. Sauder will not mean the end of the Sauder School of Business, nor the information found there. Condolences to his family, and all of those affected by his passing.

In other news;

Yesterday on CBC, it was said that the pine beetle infestation of BC's boreal forests will lead to an economic recession for BC. Carol Taylor, BC Minister of Finance, said a couple of weeks ago that BC will likely go into recession if the US does, and as the building industry in the US suffers under the housing slump south of the border. A couple of months ago, forest industry commentators said that the forestry sector is already in recession. I did not catch all of the facts, but I believe that I heard that forestry is responsible for between 2% and 3% of the BC economy, and 9% of the workforce. That seems like a small number to me, and my searches have failed to turn up more concise information. I guess that RE is now the dominant part of the BC econmy.

The numbers over at Rob Chipman's appear to be positively nutty. On Monday, the sell/list ratio was 267.09%. Bullish, or just the result of a seasonal slow-down in listings? Fish is not even bothering with numbers until the New Year, and I am not reading anything into them either. I really do look forward to Spring to see what will happen though. I believe that we have topped, and ought to see a cooling in the Spring. Note that I am not vainly calling a top though, I just think that we have finally topped.

I'm sorry for the paucity of posting as of late, it's been a rough, and very busy week. Lil solipsist is fully ambulatory, and really keeps me hopping. I hope that all have a great Crassmess, and that we see some real excitement in the New Year. I will continue to post as I am able.

some call them condors

Thanks to trotter for the video link to Real Estate Vultures.



I just love the close-up of the foreclosure sign, and that big projects, especially condors, are also circling the drain in many markets. Granted, this is in the US, but what happens there, eventually happens here, and here, we are not quite so resilient.

In other news:
Vancouver crowned break-in capital of North America.

A new report has given Vancouver a dubious honour: the highest break-in rate of all major Canadian and American cities, nearly four times that of New York City.

Last year, Vancouver recorded more than 1,100 break-ins per 100,000 residents while New York City had just over 300.

The numbers are contained in the annual report by the B.C. Progress Board, which showed Vancouver had the second-highest combined violent and property crime rate among all major cities in Canada and the United States.

Would the BC Progress board have a positive bias?. Is Surrey still the car theft capital of NA?

Nevermind, this is the best place on earth - for those who are connected.

melting into lorem ipsum

Or, orem ipsum, as the case might be (pun intended).

So, I was thinking of the slow melt-down that is going on (behind the oblivion of the masses), and was/am going to write about it, though, I resist because so many, with a greater understanding than I, have already expounded on it so well. Because I am very visual, and like to have a pikshur with my posts, I did a Google image search for "melting". As expected, I saw quite a few icebergs, glaciers, and other global warming pap, but through serendipity, kismet, fate, or whatever (my life seems to go like that), I came across the pic' below.



WTF does that have to do with the price of RE in Vancouver?, or, the price of tea in China? I think I hear you ask. If you forgive me my loquaciousness, I will elucidate...

I love language and languages, and Latin, being at the root of so many languages, has always fascinated me. I do have a rudimentary understanding of it, but I like to know. I have come across lorem ipsum quite a few times, but never was motivated to understand its meaning, so I did a Dictionary.com (and ancillary) query, which led me here.

"Nor again is there anyone who loves or pursues or desires to obtain pain of itself, because it is pain, but because occasionally circumstances occur in which toil and pain can procure him some great pleasure. To take a trivial example, which of us ever undertakes laborious physical exercise, except to obtain some advantage from it? But who has any right to find fault with a man who chooses to enjoy a pleasure that has no annoying consequences, or one who avoids a pain that produces no resultant pleasure? "

OK, so that is a bit esoteric, but to me the key word is "dolorum" (pain), and that is what I see in the future for many.

I beg your pardon if this makes no sense, I am juggling my time between posting, making dinner for Mrs. solipsist, and getting li'l solipsist to bed. The constant interruptions have shattered my train of thought. A kind of melt-down as it where...

I think that the graphic above also illustrates the relentlessness of this RE market, and the loud cries for sanity.

One last bit of Latin for you all - caveat emptor (buyer beware).

finding comparables

A search confined to Renfrew Heights in East Vancouver between $200k and $900k produces but 40 listings. This has been fairly constant for a while. But there is price compression. You can buy an old place (with few redeeming features) for only $100k less than a brand new place (with a couple of illegal suites), as illustrated below. Who in their right mind would go for that? Granted, the 60 year old place is probably better constructed, but there is really no comparison. The new place is bigger, and has a spectacular view of the NS mountains, and west to downtown. The older place claims a view, but does not elaborate. Somebody dumped $50 k or so into renovations, and is asking a huge premium.$699k

$799k

The new place has been on the market for a solid 6 months, with one price reduction (from $829k, if I remember), and is due for another reduction of at least $250k if they want to sell it. The renovated old-timer needs a reduction of at least $300k. Those reductions will happen.

Finding comparables is a joke.

Addendum:

I forgot to mention that these places, and many others, are sitting empty. I think that there is a huge supply overhang in SFH as well as condo's.

it's not news

image from here

It's probably not news to you, but the BoC cut the prime rate by a quarter point today. I'll bet that all those that scrambled for pre-approval and bought over-priced shacks in the summer will be happy that they did so.

I have read rumours (no links) that the BoC will be cutting rates by another 3/4 of a point before a year has passed. Smoking, impervious economy and all, y'know.

It will not save this (or other) doomed market(s) though, the writing has been on the wall for a while (4 years...), and I believe that the psychology has changed. There will still be sales - there always will be - but for less and less until purchase prices catch down to rents.

levity and brevity

$399K
$485K

Pardon my absence. I have been around, but a bit under the weather, and l'il solipsist is going through a very cool stage (just starting to walk), so I am greatly distracted.

Further, there just does not seem to be enough meaningful to write about - beyond the same old/sameold, and the expected "minor" catastrophes as the sub prime debacle continues to begin to unfold. BoC seems to be pumping money in almost daily, but it has become ho-hum to the MSM and sheeple in general. The stock markets continue to be manipulated, but are the beneficiaries of such blind faith in my view. Ignorance is more like it.

So perhaps some levity is in (dis)order.

I found these gems by following a link to Sapperton, and all I can really do is laugh. An MLS search of the area delivers 3 listings between the default $200K-$900K. It really just is nuts.

I sent the links to my sister (who lives in Hamilton, Ont.) and she was so shocked that she has not replied yet. It might be fun to send listings like this to China, and Germany, and you get my drift. Emblazon them with THE BEST PLACE ON EARTH, include the video of the Welcome Wagon at YVR. That might cool the market some.