May 17th, 2012 —
Would you pay $1,488,000 for the little house below in Van’s Kitsilano neighbourhood (not the best, not the worst), with a nine-year-old reno on a 33-foot lot corner lot? Well, actually somebody shelled out $1,525,000 almost exactly 90 days ago. Here’s the sold listing.
Now, here’s the new listing. Different realtor. Same pictures. Same words. But new price. Now it can be yours for $1,798,000.
“It’s the same crappy house,” says Jason. “We know because we saw it.” Jason and his wife are university professors at (sort of) nearby UBC, and they’re not impressed. “A roughly 250K mark-up in the past 3 months?…. It shows the absolute greed and insanity of this free-based capitalism…… I thought you might find this amusing…..”
Sure do, Jason. We’re at an interesting intersection of human emotion and perception. Sales in Vancouver are down 19% now year-over-year, with average SFHs cheaper by 9.8% – some say one quarter of the way to the first stage of correction. But at the same time, CHMC in a new report claims there has been ‘no clear evidence’ of a real estate bubble, even though prices rose 130% and a single detached home still carries a median price of $1 million. Oh yeah, and it takes (according to RBC) 72% of pre-tax income for the average family to own a home, which is more money than they actually have.
It would be absurd if not hilarious. Here’s Global TV, for example, interviewing ‘experts’ making excuses for declining sales, insisting a correction of 10% or 15% is crazy, even as it takes place.
“The message to buyers,” says this proud network, “is the economy is in reasonable shape, there’s a lot supply out there, and interest rates are still low. So just because sales are slumping, don’t bank on prices doing the same.”
“My wife and I are no longer so angry about the market,” replies Jason, who sounds pissed to me. “We own a 1350 sq. foot duplex in Kitsilano that is almost paid off and are now no longer interested in moving up. We have a different attitude in the sense that we are convinced the market is turning down , as there have been 100K -150K price corrections (typically going down) in a few short weeks on many properties in Kits over the past few months (since February)….It seems as though nobody has told the listing agent of the house above that the direction of the wind has now changed….
“Anyways, we are no longer looking to upgrade from our smallish place and we divorced our real estate agent a few weeks ago who kept trying to convince us to bid very high on places in order to “win”…….we came to the conclusion that our agents were not representing the market as it is now and were too caught up in the hype…. and effectively were giving us very bad advice…….. We are happy to sit on our hands.”
This goes to the point I’ve been making in recent posts. Interest rates are probably irrelevant. Tough new rules from the banking cop may not matter. The fact CMHC is burning through all its insurance money could be moot. Greed and excess, leading to anger and disgust, are the most powerful economic forces a housing market can face. When buyers no longer wish to buy, the snap-back can be brutal.
Vendors, agents, media pumpers, Re/Max marketing dipsticks along with self-serving economists and ‘experts’ have all played a role in helping Canadians price themselves out of their own homes. Real estate’s become so expensive it’s crowded out savings and investing for most families, created a towering pile of debt. The consequences of this are so obvious most people miss them.
But then, most people don’t come here. Way too scary.
Speaking of which, a few words seem necessary on the photo this blog carried yesterday, which managed to turn so many people into xenophobic race warriors. Yes, this one…
This crowd showed up at the preview for a new development of 600 homes to be built in a distant corner of the GTA, ranging in price from half a million to the full seven figures. They did not come to buy, but to view plans. Demand has been so monumental the builders are running an online lottery to see who actually gets to visit a salesperson. Of course, after ‘winning’ an appointment, every single prospect will buy. Clever.
Did the developer target the large local Chinese population? Obviously. And successfully. Anyone who’s visited Markham or Unionville lately knows the population is as solidly Chinese-Canadian as parts of Brampton are universally Indo-Canadian. It apparently doesn’t take too much marketing to get a thousand people from the region to flood into a sales centre, littering neighbouring roads with their vehicles.
But is this, as so many stated here yesterday, HAM? That acronym means Hot Asian Money and refers to horny Mainland Chinese who drop from the skies with bags of money, supposedly driving up prices and irritating natives who then feel forced out of their birth neighbourhoods.
Does it seem a little absurd to you that a shuttle from Beijing would fill with lusty rich Chinese determined to target a cow pasture, 45 minutes north of Toronto, where a mess of suburban houses have yet to be built? Or is it just the sight of a few hundred local Chinese families ready to buy McMansions that had so many yahoos talking out of their butts?
This is a financial blog. If a group of people want to do silly things with their money, buying at the top of an asset cycle, and do it en masse (like most of the folks in Vancouver), then tough for them. They, too, and will reap what they sow.
Now, move on.
Man,………………… this is getting stoooopid.
Too many people think they are a ” Donald Trump”.
I say ENOUGH is ENOUGH.
Show me (i) your Passport and (ii)your Citizenship.
Then you have NO business buying Residential Real Estate, it is a right for the Canadian citizens, but a discretionary privilege for NON Canadians.
Our political whores have got to stop this nonsense, and it within their power to do so. This issue is reaching critical mass, prior to implosion, which is only a matter of WHEN…not IF .
The Chickens are now coming home to roost .
This is going to get VERY V-E-R-Y Ugly.