Vancouver's Real Estate Market

[4444]

Originally Posted by Carl Johnson

except given the amount of foreclosures that will hit once this RE bubble ends, they are going to have a lot of competitions with people dumping their cars to make the mortgage payments.

i wonder what will happen wrt foreclosures in canada vis a vis US foreclosures.

in the US, it's the wild west, literally, a foreclosure goes to auction, deals on court room steps sight unseen, etc. (i've been a buyer of such a process - it's not ideal). the other main difference is the short sale - not sure if there's an equivalent in Canada. Just never do it, they're a waste of time that don't usually work.

from what I understand in Canada, the legal aspect of the foreclosure sales process is much different, with a judge having to approve the sale "at or near fair market value" - the interesting aspect would be FMV may be crashing and foreclosures would skew that further.

i'm just stunned at the absolute stupidity of governments in your part of the world. Crusty in Asia touting real estate... but nothing to see here, Moonbeam talking out his arse and contradicting himself - Van = affordable one minute, then the next "gov must do something about the affordability crisis" the next.

[4444]

Originally Posted by Carl Johnson

i'm a homeowner and i certainly don't want to see my home's value get cut in half, but what i think or believe does not matter. fundamentals are fundamentals. prices will come down and when it does it is going to cause a lot of pain. like any market, it is taking stairs on the way up, but elevator on the way down.

the fucking irony...

[Alpine]

Originally Posted by MarkyMark

It's a guessing game really, but it's funny how the people who own generally say it'll never crash, and the people who don't say it's only a matter of time.

I've noticed that most people that say that the real estate market will "crash" base it on "fundamentals." But what if, what if... the "fundamentals" have changed? What if they are already outdated? "fundamentals" can and do change and one must be flexible and adaptable to such change.

[4444]

Originally Posted by Alpine

I've noticed that most people that say that the real estate market will "crash" base it on "fundamentals." But what if, what if... the "fundamentals" have changed? What if they are already outdated? "fundamentals" can and do change and one must be flexible and adaptable to such change.

can you actually support a change in fundamentals based on another city / facts?

look at the stock market, it is effectively bound in an EPS multiple range. absolute amounts are irrelevant, it is all about the multiple.

real estate is the same, long term. long term is the key thing here, if you're here for a quick flip, then go for it, but the party will end at some point.

[GLOW]

what average percentage drop in RE do you think is required for the house of cards to come crumbling down to cause forclosures?

[UFO]

Foreclosures won't happen unless people fail to make the payments on them. Something needs to trigger this bubble pop to make it worth writing about, it wont happen on its own. A couple situations this can happen:

-mass loss of jobs. As mentioned, what is Vancouver's economy really? The fact that there isn't a single driver, would also make it less prone to mass loss of employment to a degree that would result in large number of foreclosures
-large quick interest rate hike. Government understands how fine the balance is right now regardless of them saying something completely different. Rates will definitely go up, but it will be incrementally small and take a long'ish period of time.

If as of right now nobody from China buys another home, the 'damage' has already been done. If investors choose to liquidate their properties and take a 25% loss let's say, prices are still beyond the means of many and only brings us back to 2014 levels. If prices drop 50% then we're back to pricing roughly when this thread was originally started asking when this bubble will pop

That's just my average guy thinking point of view.

[HKSR]

Not to burst your bubble (pun intended), but here's an article from back in 2010 (6 years ago!):

Is Canada?s housing bubble about to burst? | Financial Post

Those hoping for the bubble to burst, and prices to come tumbling down will be waiting for a long, long time.

Besides, with many average homes inching around the $2M mark, a 50% correction still puts homes in the $1M range... oh boy, totally affordable now!

[jasonturbo]

Originally Posted by Alpine

I've noticed that most people that say that the real estate market will "crash" base it on "fundamentals." But what if, what if... the "fundamentals" have changed? What if they are already outdated? "fundamentals" can and do change and one must be flexible and adaptable to such change.

Nailed it.

Fundamentals in terms of home ownership are now essentially a 50's era relic, this is the era of massive debt, things have clearly changed in terms of what is considered "affordable".

The way I see it, there are two ways this scenario ends.

- Interest rates go up and prices tank

or

- Length of mortgage is extended to 50 years etc.

[G]

Can you explain how raising interests rates will tank prices? From what I hear, a large percentage of foreign investments require no financing. Also, the foreign investments that do require financing are doing it because the rates are so low that its more advantageous even though they have the capital to purchase it outright.

[Hondaracer]

Prices dropping 50% will never happen, I'd bet my life on it.

And if prices were to drop even 30%, lol...well, that makes it wayyy less attractive for foreign ownership right? They'd be buying up more property than ever.

The only thing that would cause a complete crumble is enforcing some of the strictest ownership rules around, and look at our government, you think they'd ever even consider it?

Let's see where we are two years from now and we can look back at these 2016 pages recalling the dream of "the bubble"

[VR6GTI]

So many people waiting on the sidelines that if there was a 30% correction properties will be gobbled up.

[Hondaracer]

I think people underestimate the buying power locals have even at these prices.

[Great68]

Originally Posted by VR6GTI

So many people waiting on the sidelines that if there was a 30% correction properties will be gobbled up.

Isn't that a classic catch 22?

Demand decreases, prices decrease.

Now prices are lower, all these people (say they are) ready to buy, demand increases, prices go up again?

[Liquid_o2]

Originally Posted by Hondaracer

I think people underestimate the buying power locals have even at these prices.

I think you overestimate. People only have the buying power because they are stretching themselves to the limit, borrowing money from family, parents providing the downpayment, living in the basement and renting the upstairs portion to tenants, etc.

[Eastwood]

Part 2 if anyone is interested.

Surreal Estate - Part 2: What Vancouver Is Doing About the Shady Housing Market | VICE | Canada

[MarkyMark]

I'm wondering what percentage of people would be forced to sell if the rates went up say 5%?

How maxed out are certain people when it comes to their mortgage? It seems crazy that everyone is affording 600k and up houses and still living comfortably.

Or maybe I'm just shitty at managing my money lol

[VR6GTI]

5% is a huge jump i would say a lot of people would have to sell at that rate on a 600k mortgage it jumps $800 thats a chunk of money a month for a lot of people.

[MarkyMark]

Yeah 5% may be a bit much but even a rate hike that adds an extra 400 a month seems like it would stretch a lot of people too thin.

[6thGear.]

Banks would never raise interests at such an alarming rate. As someone pointed out it will go up in small increments. If such a thing occurs it will take years. Only thing banks can do is stiffen lending rules. But ask any banker, no one can predict what future mortgage rates will be, only speculation based off of analysis

[jasonturbo]

Originally Posted by 6thGear.

Banks would never raise interests at such an alarming rate. As someone pointed out it will go up in small increments. If such a thing occurs it will take years. Only thing banks can do is stiffen lending rules. But ask any banker, no one can predict what future mortgage rates will be, only speculation based off of analysis

Never? The interest rates offered by lenders trail that which is set by the BOC, it's not a matter of the lenders cranking rates so much as the BOC.

Just incase anyone is curious as to why rates shot up so high/fast in the 80's;

During the early 1980s Canada experienced higher inflation, interest rates and underemployment than the United States.[57] The bank of Canada rate hit 21% in August 1981, and the inflation rate averaged more than 12%.[58] During this inflationary period, Canadians sought to protect themselves through investment in the housing market. Some saw an advantage to high interest rates through speculation in real estate and other assets. This increase in transactions was financed through borrowing and ultimately caused debt levels to rise.[59] Canadian firms, preoccupied with prospective investment opportunities due to high inflation, no longer focused on innovation and productivity improvements. In addition, high inflation was partly responsible for larger government spending. The overall tax burden rose from 27% of income in 1951, to 34% in 1969, to 37% in 1988.[60] From 1975 to 1992 national debt more than tripled to 8% of GDP.[61] The resulting high interest rates caused more Canadian income to be paid out to foreign holders of Canadian public and private sector debt. During this period Canada changed from a country producing and exporting mainly primary products to one that increasingly produced and exported manufactured goods.[57] Jobs were lost to mechanization in industry. Moreover, globalization meant that Canadian firms had to down-size their workforce in order to stay efficient and compete internationally.[62] In early 1980s, Canada’s unemployment rate peaked at 12%.[58] It took almost four years for the number of full-time jobs to be restored.[62] A slowdown in productivity also emerged during the recession. Real GDP declined by 5%[58] between June 1981 and December 1982 and average output per worker slowed to 1%.[58] The U.S. decision to switch to a floating exchange rate devalued the Canadian dollar. By 1979, the Canadian dollar was worth 85 cents U.S., which made U.S. imports more expensive. On the other hand, Canada’s major exports declined in price. Combined with high inflation, and interest rates, these high commodity prices reduced the standard of living.

Interest rates can, and do, move quickly in response to changes in macro economic sentiment.

[kr4l]

I'm pretty sure if rates hiked up like in the 80's, Canada as a whole would explode, not just Vancouver housing.

Edit: sorry didn't mean shoot to what it was in the 80's, but at the rate

[MarkyMark]

It wouldn't have to go anywhere near the 80s to fuck shit up

[AWDTurboLuvr]

Originally Posted by kr4l

I'm pretty sure if rates hiked up like in the 80's, Canada as a whole would explode, not just Vancouver housing.

It was pretty bad in the late 70's, early 80's in terms of the economic health of Canada and other western societies. I'm sure you could ask your parents what it was like to own a home at that time. A lot of my parents' friends went bankrupt as they couldn't pay their mortgages, especially young couples.

[nah]

Prime for my mortgage in 2007 was 6.25%. That was only 9 years ago.

[Tapioca]

Why Vancouver is Canada's worst city for young professionals - Vancouver Magazine

I don't know... until the lineups at the latest brunch spot die, I think the majority of young people in this city would rather live at home, or in an illegal basement suite, than move to Prince Rupert so they could buy a house.