Documenting Vancouver real estate price movements
We’ve been hearing about the successful soft landing, the “there is no bubble to pop”, it’s a flat market or some moderate price drops from the usual suspects in the real estate industry. The Americans just wish that they could have engineered a brilliant soft landing but unfortunately, unlike us, they are not brilliant. Additionally, it’s different here, no more land, billions of rich asians want to buy every multi million dollar crack shack etc etc. If only we could compare our performance to all of the American cities that went through their housing bubble so that we can have empirical evidence of our soft landing. Well here it is:
The following chart shows 14 US cities that were shown in the Case Shiller calculations here: US HPI Data They actually profile 20 cities but I eliminated 6 that did not increase by at least 40% during the run up from 2000 on. Take Dallas which only gained 25% in value in 7 years before dropping about 10% and then pulling back close to previous highs. Vancouver by comparison has increased by over 150% since 2000.
What I did for each of these cities is determine the peak price month according to the pricing index and then measure the index price drops in 6 month intervals. With that information we can compare against Vancouver’s stable, moderate, flat non event as described in the main stream media.
|City||Peak Month||6 mo||12 mo||18 mo||24 mo||30 mo||36 mo||42 mo|
Now, where does the Vancouver West detached home sit in comparison to these numbers? First of all, if you are a home owner like myself then you should probably sit down. OK, ready? Our peak month according to the MLS Home Price Index was April 2012 and 6 months later we were down 8.6%, so 50% HIGHER THAN ANY AMERICAN CITY. After 8 months we are now down 11.1% which, with 4 months to go in the period, is much higher than all US cities other than Miami. THIS IS NOT FLAT !!! THIS IS NOT A SOFT LANDING !!!
So where are we heading over the next months and years? Well you never know… If I pulled up this same chart in early 2009 the conclusion would be the same and yet the market recovered very quickly and continued to its new meteoric heights. Of course things are much different now – debt is at all time highs, mortgage rates at all time lows and poised to begin increasing, banks are tightening up their credit, “asian investors” have left the building not to mention the boomer trigger.
It was a trillion dollars of cheap credit that saved this mess in 2009 but the fun is over. Just to get back to long term over-priced Vancouver trend lines we are in for a 40% drop although bubbles never stop at the trend line, they always overshoot it. If you look at price/rent or price/income ratios we’re due for a 50%+ drop. If you want to compare similar properties in Vancouver and Southern California we’ll need to drop 75% and trade our rain for sunshine. It’s not looking good.
One thing to keep in mind is the nature of the drop over time using the US as a template. These are the periods following peak price along with the average drop in % for that 6 month period
We are currently entering month 9 from the peak and can probably expect similar monthly drops of over 1% per month. After 12 months of that, reality seems to set in that the bubble is popping and prices could potentially free fall. In the US the average city price descent tripled its pace for 18 months before their “soft landing”.
This is not a soft landing.
I recall a couple of years ago that West Richmond had spike in Real Estate bids…rumours of “$ 1 Million plus” offers for tear downs on small lots. It smelled really fishy. The reason I felt this is I followed the market for years, and this was the Spring Market, one of the (2) peak annual selling periods.
My gut instinct ? Someone was spreading Bullsh*t to get people into the dreaded ” herd mentality” . Like crooked stock market schemes…they were trying to create a market where one didn’t really exist except for shaking the trees for the last Greater Fool.
Over time, it became apparent that some ” less than honourable parties” had tried to create a ” BOOM ” with bogus sales that were rigged and not worth the paper they were written on.
EXAMPLE: In my neighbourhood:
I had a neighbour “X” that tried to sell his house for years. Large house,indoor pool , approx. 5,000 + sq.ft. built in the early 1990’s with very nice yard. Could NOT sell it at high $800,000. Went through several realtors.Last year..saw a moving van pull – up..and they were gone. My other neighbour ” Y ” told me neighbour ” X ” sold for approx $ 1.3 Million. No one has moved in, but shortly thereafter a ” For Sale ” sign went up. My neighbour ” Y ” said the new owner/s are asking over $3 Million. WTF ? These buyers are in for a rude awakening re: B.C. Real Estate .
I was born and raised in Vancouver area, and seen a lot of change. Yes, Vancouver and surrounding area is a beautiful area, at least natural beauty. However, as the joke/s goes,…. our rainy season lasts from Sept. 1 to August 31. No…..That’s not a ” tan “, that’s ” rust “. In hindsight, I think I have the right and perspective to say that this Vancouver area has turned into one big brothel.
The U.S cities listed above may be far more attractive per se….so why did Vancouver prices shoot so much higher ? The bigger they are, the harder they fall ?.
Does this support my premise that we have lax laws in CANADA , passports were sold they highest bidder…..all the indications of a MAJOR global money- laundering operation, and effectively attacking the best and better interests of long – established Canadian Citizens.
So… who are the victims ?
Unfortunately, as this article notes….the rug is literally being pulled out for recent buyers, with a dark deep chasm below. In comparative analysis, far better prime US real estate has seen major drops….
It is the same scheme, same snake oil salesmen..the Banksters and their peripheral allies… ie realtors, developers, politicians. Debt is an asset to Banksters…….it is the banks advantage..their life blood…..but an enslavement to all OTHERS.
” Vancouver by comparison has increased by over 150% since 2000 “.
” OK, ready? Our peak month according to the MLS Home Price Index was April 2012 and 6 months later we were down 8.6%, so 50% HIGHER THAN ANY AMERICAN CITY. After 8 months we are now down 11.1% which, with 4 months to go in the period, is much higher than all US cities other than Miami. THIS IS NOT FLAT !!! THIS IS NOT A SOFT LANDING !!! “
THE simplest analysis is putting oneself in either set of shoes ie BUYER or SELLER.
If you are a buyer…your instincts have dramatically shifted from avoiding bidding war like the plague TO a how L-O-W can it go ?
SELLERS ?…those that didn’t swallow the kool aid and bought before the insanity should be OK…, certainly much less exposure to the long overdue collapse.
As I noted previously, the collapse can overshoot what the “real market” value is…it is some sort of economic physics of fiscal deceleration. In the quote cited above….ie price increase of 150% since 2000…the correction could be much greater than 150% reduction. Keep in mind that much was still UNaffordable in 2000 to many parties.
Ultimately, rather sad…..IMHO, most people want a ” home “…a place to call their own, not a rather corrupted and easily corruptible investment, and having our so – called Gov’t as UNaccountable patsies who have betrayed us. How could they NOT know this was a global ponzi scheme if they even did a modicum of research ?
Greed , Stupidity and Bad Gov’t combined can be a real b*tch.