# The Crash is here..............



## sags

Interesting post at the link, showing the true real estate sales prices for the Vancouver area.

They are quite different from the number produced by the local real estate board, that is so complex it takes a manual to sort out how they calculated it.

Check the computer screen images in the article.........and it isn't complicated at all.

Prices are down...........up to 50%........depending on area.

This isn't a long, slow decline in Vancouver...........it is a crash.

We will see how the GTA and other areas fare.

The numbers say a lot about why Finance Minister Flaherty picked up the phone and demanded Manulife raise their mortgage rates. The government doesn't want any more liability downloaded from the bank to the CMHC. 

How will people react when they realize they owe hundreds of thousands of dollars on a home more than what it is worth?

Faithfully make the payments and suffer in silence..........or walk away, suffer the consequences for a few years, and start over?

This kind of direct intervention in interest rates is unprecedented.

The Finance Minister now tells mortgage lenders they have to charge more?

I seem to recall the G.W. Bush changed the bankruptcy rules to make it more onerous to file, but it didn't really stop the carnage.

If the government mentions tinkering with the bankruptcy laws........oh......oh.

http://whispersfromtheedgeoftherainforest.blogspot.ca/


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## NotMe

Yeah.. that site reeks of reputability. Well, maybe it just reeks.

Please tell me where I can a house in my neighbourhood (Don mills and lawrence, toronto) for $200K please. Cause the two up the street just sold in 3 days for over $690K. Not a bear, not a bull, that just really happened though.


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## lonewolf

Real estate bubble is one of the unintended consequences of CDIC. Banks can make risky loans & get investors to loan them money because the investor thinks they are covered by CDIC. Money is not deposited into a bank for safe keeping but is leant to the bank.

CMHC also promotes real estate bubbles. The more money that can be leveraged to build a house of cards the bigger the house of cards & the bigger the fall.

The goverment is not proactive but reactive as they destroy the money world.


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## Sampson

There is no 'lying'. Just find a house that has taken several months to sell. You should be able to track/monitor the decline of 50% in asking price. Yo9u wouldn't see this in every listing, but many of them if they are to affect the average price.


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## sags

The article could be nonsense and fear mongering...........but the screenshots are supposed to be from the local real estate board, and unless they have been photo shopped (possible), they show sharp declines in home sale prices in certain areas in and around Vancouver.


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## indexxx

Well, 'sharp declines' from where the greedy bastards first listed- which of course is an astronomical amount to ask for a place to live. It's like anything else- people try to ask as much as possible and then settle for slightly less- same thing happens selling a camera or a guitar or whatever on Craigslist. I live in Vancouver, and I don't see any signs of a 'crash' happening around here despite my hoping for one so I can buy instead of rent; a $4,000/month mortgage doesn't sound too appealing at age 48.


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## Sampson

The graphs don't show anything.

Month 1 - 3 sales, $800k, $1M, $1.2M - average = $1M - all houses are 3000 sqft
Month 2 - 2 sales, $600k, $800k - average =$700k - both houses 2000 sqft

Average price has decline by 30%.

Non-contextual average values are meaningless.


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## sags

Agreed..........to give an honest evaluation, you need comparable homes.

Too bad, we don't have the same transparency as in the US, where the history of sale prices can be found for a home.


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## Sampson

I think the decline in sales is dramatically affecting these averages. That is well documented. It is a shame that all the details are not accessible more openly, its all in MLS though, and if you are in the market, any reasonable realtor will pull the details for you.


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## none

Using averages is stupid - a median is far more appropriate for these data.


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## Charlie

He does give numbers for three recently sold homes that had prior recent sales. 

The declines from the 2011/2012 original sales to the new numbers are however only 5% for two homes over about a 2 yrs period; and 5% for a townhouse over 6 mos. I thought he'd be able to find more extreme examples then that.

Possibly the big crash will come. I find it hard to fathom prices in Vancouver. But it doesn't seem to be here yet despite the hyperbole of that site.


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## sags

From the Vancouver Sun...........statistics from the real estate associations..........

http://www.vancouversun.com/busines...cline+helps+fuel+drop+home/8099556/story.html

Overall, sales in BC down 24% and prices down 8%..........

In one area (South Okanagan) though..........prices down 20% year over year.

A pretty significant decline, for anyone who bought in the past year or so.


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## sags

none said:


> Using averages is stupid - a median is far more appropriate for these data.


Maybe, but if they used averages in the past, and use them now............it does show a trend.


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## Berubeland

I'm not seeing any crash yet in Toronto.


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## CanadianCapitalist

We already have a much better way of tracking housing value than CREA average selling prices called the Teranet - National Bank House Price Index. The index calculates housing price change by tracking change in price of the same house transactions over time. According to this index, we do not have a housing crash... yet.

http://www.housepriceindex.ca/default.aspx?langue=EN


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## lonewolf

How is the value of a home determined regarding property tax ? It seams to me they are over valued but iam only basing it on a few homes.


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## sags

I doubt falling assessments would offer much savings for homeowners........as the municipality would simply raise the mill rate.

They have to feed the beast.


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## none

sags said:


> Maybe, but if they used averages in the past, and use them now............it does show a trend.


No. Means are far more sensitive to outliers which just adds noise and can result in identifying trends that aren't actually there.

I'm all for using biased data (that's what I do but I correct for it) but averages just suck for these data.


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## 1sImage

I love watching those property TV shows, when they show a POS House in Vancouver, then show you the million $ price tag.

I just shake my head, none stop for the entire show.


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## none

I understand that things have a _relative_ value but sometime you just need to step back and think things in absolute terms: _is this house really worth a half a million??_

Loos at places like Edmonton. A house in northern alberta that is frozen for 6 months of the year, covered in black flies and mosquitos for 3 months, and mucky and wet for 2 months during the thaw. The one month of summer is nice though.

I think people are finally starting to wake up and realizing these house aren't worth what they paid for it or what others are asking. It's ridiculous!


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## My Own Advisor

Real estate is worth what anyone is willing to pay for it. If you don't like the prices, then don't buy.


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## none

My Own Advisor said:


> Real estate is worth what anyone is willing to pay for it. If you don't like the prices, then don't buy.


I don't plan to until people speculative value stops being such a major factor in the real estate market. I'm quite sure not buying a house in the last 3 and future 5 years is the best investment I'll ever make.


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## My Own Advisor

...then I think you're making the right decision.


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## none

I can't beat the 50% dividend I get from renting over buying right now.


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## My Own Advisor

none said:


> I can't beat the 50% dividend I get from renting over buying right now.


ha


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## Cal

I don't know if we will have a crash or not. I liken a crash to when a balloon pops. I think our RE market will be like how a balloon slowly loses air over time, becoming less and less inflated.


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## none

Sounds familiar: http://www.nytimes.com/2005/08/08/opinion/08krugman.html?_r=0

It depends what you consider to be a crash. Simply a 20% permanent correction and houses increasing with the rate of inflation (which I think is what TD bank is predicting - which many think is overly optimistic) is enough to financially destroy a lot of people.

A lot of people have been protected from the harsh reality of the costs of home ownership due to asset appreciation. When that reverses a lot of people are going to have a rude awakening.

For those who bought their first house with <10% down within the last 3 years are going to get hurt.


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## andrewf

Gentle declines don't really happen in reality. Though people always talk about them around the top of bubbles. Like the 'gradual' 40% drawdown in the S&P500 from 2000 - 2003. Market psychology doesn't really support gradual declines. Gradual increases, bubbles or busts are more common.


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## none

It depends on what you call gradual - for example the stock market crash of 2008 took 18 months from peak to bottom - for around 50%. For comparable real estate it took twice that long. Whether three years constitutes a gradual decline or a crash is up for debate.

For those in at the top I think both kind of sucked.


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## Charlie

More fodder for the real estate bears:

http://www.bnn.ca/News/2013/3/21/Nearly-one-in-four-Vancouver-condos-empty.aspx

25% vacancy doesn't jibe with the anecdotal info I'm seeing -- nor with the continued high rents....but interesting none the less.


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## none

CanadianCapitalist said:


> We already have a much better way of tracking housing value than CREA average selling prices called the Teranet - National Bank House Price Index. The index calculates housing price change by tracking change in price of the same house transactions over time. According to this index, we do not have a housing crash... yet.
> 
> http://www.housepriceindex.ca/default.aspx?langue=EN


There was an interesting critique of the HPI on Garth's blog yesterday. Apparently the HPI track id really is a 6 month smoothed average which would result in there being little information to point to a start of a housing correction. Buyer beware I guess.

http://www.greaterfool.ca/2013/03/21/ethics-2/#comments


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## CanadianCapitalist

none said:


> Apparently the HPI track id really is a 6 month smoothed average which would result in there being little information to point to a start of a housing correction.


I can't comment on the HPI because it looks like MLS has created its own *home* price index. The index I'm referring to is called the *house* price index and it tracks the price level change in transactions of the same house over time. It is a much better way of tracking housing price level than the raw statistics used by CREA.


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## Charlie

In a post about ethics and the manipulation of numbers and statistics to misrepresent market conditions, he trots out his own 50% price decline in Richmond. A good friend of mine is buying in Richmond. Prices are down slightly....market is 'soft'-ish. But NO 50% decline! Not even close. I can't resist reading his blog when it's linked here....but it makes me sooo mad. He's a showman. A clown. Only loosely based on real life .


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## none

CanadianCapitalist said:


> I can't comment on the HPI because it looks like MLS has created its own *home* price index. The index I'm referring to is called the *house* price index and it tracks the price level change in transactions of the same house over time. It is a much better way of tracking housing price level than the raw statistics used by CREA.


Thanks for the clarification. I'd have to think about it a bit more but I think this index also likely suffers from some serious lag issues, particularly when sale volume is down.


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## none

Charlie said:


> In a post about ethics and the manipulation of numbers and statistics to misrepresent market conditions, he trots out his own 50% price decline in Richmond. A good friend of mine is buying in Richmond. Prices are down slightly....market is 'soft'-ish. But NO 50% decline! Not even close. I can't resist reading his blog when it's linked here....but it makes me sooo mad. He's a showman. A clown. Only loosely based on real life .


The only real problem I have with Garth is that he goes out of his way to be fairly crass when it offers little to the conversation. I guess if you're writing a blog post about the same thing 6 days a week you need something to keep it fresh. Garth gets a lot of 'credit' about identifying the housing crisis. In reality it's the furthest from the truth, many, many people have been saying that one is far over due but Garth is just the most vocal about it.


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## Charlie

Agreed, none. I think he raises good points. But they're lost in the hyperbole.

He also loses some credibility with me as he has been spectacularly wrong in the past. But he is a good read. And, I think, very insightful once you pare away the chaff. That's why I find him annoying. He's too smart to dismiss....yet deliberately (IMO) dishonest at the same time.


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## none

Charlie said:


> Agreed, none. I think he raises good points. But they're lost in the hyperbole.
> 
> He also loses some credibility with me as he has been spectacularly wrong in the past. But he is a good read. And, I think, very insightful once you pare away the chaff. That's why I find him annoying. He's too smart to dismiss....yet deliberately (IMO) dishonest at the same time.


I can see some of that. I certainly don't agree with all of his investing advice. I cut him slack with the timing of the housing correction goes though. The conservative government instituted foolish policies that had the effect of ballooning the housing market to the crazy levels we see now. No one could predict that they would be so foolish. Anyway, time will tell I suppose.

One thing I was thinking about houses being such a great investment is that why are proceeds from a house sale tax free? Only reason I could come with is that housing has been historically such a horrible investment (once inflation is taken into account) that without this tax free status houses would be massive losers.

Maybe a good idea would be to tax value at some level (say 20%) of proceeds above the inflation rate over the time of ownership (which would also allow for capital loses).

I'm a firm believer that variable house prices are quite damaging to families and the economy as a whole and I could see something like that being quite effective is getting speculators to calm the hell down.


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## sags

The only thing I care about regarding a house pumping or a bubble..........is the government should not be taking on undue risk to support bank profits. If people want to bankrupt themselves buying a house..........it should remain their problem.

Flaherty has finally announced in this budget that CMHC will no longer offer insurance to the banks on conventional mortgage portfolios............so the banks can package and sell them to investors for a better price, given the governments guarantee.

He is also going to require more capitalization for some Canadian unnamed Canadian banks.

One has to wonder........given the changes he already made to mortgage amortizations.........changes made to buyer qualifications......interfering in mortgage lending interest rates.......changes to CMHC insurance coverage........what "housing index" he has the ability to reference.

These aren't the actions of a Finance Minister confident that housing is sailing in smooth waters.


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## none

That's actually one of the largest beefs I have with governments in general. They always seem more than happy to take on and underwrite the true risks associated with industry (whether banking or resource extraction) and lay it onto the tax payer.

For example, you want the keystone pipeline to go through? Sure, just so you know there will be a $100 fine for every liter of oil spilled. Oh, you don't need that because it's such a low probability of actually happening ? Well if that's true then I doubt you won't hard time finding a private insurance company to cover it then. 

BTW: I'm offering billion dollar insurance policies that the sun won't explode tomorrow at the cheap price of $1. I'll cover it for 100 years too.

If things are so darn unlikely, let the market cover the true risks.


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## sags

Yes, but if you lose your job through no fault of your own, you can file for unemployment and be considered a possible "cheat", who needs close scrutiny lest you find yourself enjoying living on half your normal income. Maybe someone will knock on your door........just to see if you are standing there wearing work clothes and holding a lunch bucket..........in the "ready to work" mode.

And you will be sent "job" possiblilities........maybe delivering flyers, or selling energy contracts door to door.

Cause you know.........you are just enjoying being broke all the time............a little too much.


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## none

whut?


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## Sampson

If the crash is underway and areas are already experiencing a 50% decline in prices, GREAT.

No apparent effect on the larger economy, people still spending money, companies still earning and spending money, jobs fairly neutral.

This is as good of a underway crash as one could imagine.


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## sags

none said:


> whut?


Lol...........sorry a little off topic.............just my rant on how government favors banks and corporations, without the same concern for average folks.


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## sags

A comparison of what 4 million will buy in Vancouver vs Atlanta, Georgia.

http://priceypads.com/vancouver-bc-vs-roswell-ga/


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## none

sags said:


> A comparison of what 4 million will buy in Vancouver vs Atlanta, Georgia.
> 
> http://priceypads.com/vancouver-bc-vs-roswell-ga/


Yup - it's absolutely ridiculous. Like the dot-com, people will ultimately wake up, things will crash, and everyone will shake their heads about how amazingly powerful bubble creating group think is. 

I wrote a rather lengthly comment to the moneysense RE shill about how they are advising people to still buy houses where the upside is minimal but the downside is potentially life shatteringly financially disastrous. http://www.moneysense.ca/2013/03/21...king-addresses-conflict-of-interest-concerns/


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## emperor

Never really understood how a house isn't a liability. It gets worn out and needs to be fixed all the time. We need interest rate to go back to 5-6% that would fix the stock market and houses.


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## none

It is. Historically res re is a terrible investment. Hence the tax free capital gains.


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## Sampson

none said:


> Historically res re is a terrible investment.


? Define terrible.

Historically, residential RE investments outpace inflation, so better than cash, treasuries, or equivalents. Also, historically often not correlated with equity returns so a good diversification tool.


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## none

historically residential real estate on average make zero to 1% return once corrected for inflation. Hence the tax free status of the gains.

Although this is for the US, the same relationship holds for Canada with the exception of us being at the peak at the end before a large correction.


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## Sampson

This doesn't refute my point. I suppose you have to define terrible.

Many people fear inflation as it pertains to maintaining wealth, and most of peoples weatlh ultimately comes from money earned and saved through their employment. Hence, even if housing returned only 0.5% above inflation, it could provide a means of assets for retirement.


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## Sampson

If we take your data that the value of housing keeps up with inflation, then the argument for or against housing comes down to the cash flow differential between the two.

Supporters of renting always say that you can 'bank' the difference and invest that, but show me any data that demonstrates renters have higher savings rates than home owners.

Home ownership can be a 'forced' savings, so in retirement years, that renter better have been saving more than the owner, otherwise the reduced cash flow from retirement, and the fact the don't own the asset could play very negatively.


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## none

Sampson said:


> This doesn't refute my point. I suppose you have to define terrible.
> 
> Many people fear inflation as it pertains to maintaining wealth, and most of peoples weatlh ultimately comes from money earned and saved through their employment. Hence, even if housing returned only 0.5% above inflation, it could provide a means of assets for retirement.


It does in a way in that inflation protection needs the anchor that the asset is correctly priced. Houses in Canada currently are not and I firmly believe that is 80% of the markets in Canada if one was to purchase a home it would be the worst financial mistake of a lifetime. Real return bonds are currently a far superior vehicle for inflation protection.


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## none

Sampson said:


> If we take your data that the value of housing keeps up with inflation, then the argument for or against housing comes down to the cash flow differential between the two.
> 
> Supporters of renting always say that you can 'bank' the difference and invest that, but show me any data that demonstrates renters have higher savings rates than home owners.
> 
> Home ownership can be a 'forced' savings, so in retirement years, that renter better have been saving more than the owner, otherwise the reduced cash flow from retirement, and the fact the don't own the asset could play very negatively.


Sure, even in the classic weathly barber he says that housing is a frequently the best investment people ever do for the only reason that it's forced savings and the only investment people do.

There are many renters who invest more because they are not dumping money into mortgages. Actually, me and every other renter over 30 that I know.


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## andrewf

If I were to own a place, the incremental cost of ownership would have to come out of my savings... Renting probably helps me resist the temptation to spend money making the residence nicer. It becomes easy to rationalize a thousand here, a thousand there on things that make your home a bit nicer but are really just consumption.


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## none

I used to joke when I owned a house that I should just arrange my pay check to be direct deposit to home depot. That's what I think is going to be so interesting about this housing correction. The true costs of home ownership and improvement have been effectively hidden from people from crazy gains in the market.

I think I'm stealing this from garth turner but it really resonated: 'real estate looks much different going down than it does going up'. I think it's very true, life changes relatively little when you make 100K on a house (particularly if you just buy another one) but it sure will change a lot of you LOSE 100K. To be honest, I can't even imagine.


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## NotMe

none said:


> I used to joke when I owned a house that I should just arrange my pay check to be direct deposit to home depot. That's what I think is going to be so interesting about this housing correction. The true costs of home ownership and improvement have been effectively hidden from people from crazy gains in the market.
> 
> I think I'm stealing this from garth turner but it really resonated: 'real estate looks much different going down than it does going up'. I think it's very true, life changes relatively little when you make 100K on a house (particularly if you just buy another one) but it sure will change a lot of you LOSE 100K. To be honest, I can't even imagine.


First, never steal anything from Garth. He'll sue you.

Second, and keep in mind I am both a homeowner and someone who thinks house prices will go down, you have to be careful about you define 'loss'. The only time you gain or lose money on a house is when you sell. Yes, there are times that homeownership sucks and costs me money, but I also like owning and get some emotional value of it, and as a father it lets me have some assurance my son won't have to change schools for any reason (there is not a lot of houses for rent in my district). For me, if my house 'loses' $100K in value, it's not like I had that $100K available to me to begin with. Now there are some people who borrow against their house, which is stupid, but doesn't affect me and I don't think I'm that much of an outlier. On the otherhand if I'd bought with the intention of flipping that's a problem, but I've already been in our house 6 years, so even if my house 'gives back' all the gains we've had in the perceived value, we're still ok.


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## kcowan

andrewf said:


> If I were to own a place, the incremental cost of ownership would have to come out of my savings... Renting probably helps me resist the temptation to spend money making the residence nicer. It becomes easy to rationalize a thousand here, a thousand there on things that make your home a bit nicer but are really just consumption.


I think that is the heart of the issue. Making the home "better" justifies many small expenses. There are no such pressures when you rent.

And all the studies that show PR as a hedge against inflation never account for all those incidental improvements. Canadian Tire, Home Depot and Rona all rely on these unaccounted-for expenses.

Do these hidden costs compensate for the forced savings aspects of ownership? Probably they offset. So then it is the tax advantage that must be dealt with. How about a lifetime tax shelter that saves any tax when the average sale is made but taxes excess gains as regular income? (With a rollover provision.)


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## sags

There are a couple of other examples of how falling home prices could affect the home owners.

1) At renewal..........will the lender demand the difference between the appraised value and the remaining mortgage debt?

2) HELOCs..............will lenders lower HELOC limits to compensate for the reduction in equity?

When home prices are rising..........these are non issues.

When home prices are falling.........they are unanswered questions.

There was a very high percentage of homes sold over the past 10 years involving 0-5% downpayments. Those owners likely have very little equity even after years of payments. A small % decline in home values could put a lot of people in the position of owing more than their home is worth. Those homeowners also paid the most for the homes, whereas people who bought decades ago have more equity built up over time.


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## none

NotMe said:


> Second, and keep in mind I am both a homeowner and someone who thinks house prices will go down, you have to be careful about you define 'loss'.


I've never bought into this line of thinking. To put it in the context of buying and selling stocks: to insinuate that a $10 transaction fee somehow insulated you from a dramatic decline in stock price is silly. I've never understood this whole 'paper loss vs real loss' it doesn't really make much sense.

If I bought AAPL at $700 and it is currently trading at $450 I would not feel very good even if I didn't sell it.


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## none

sags said:


> 1) At renewal..........will the lender demand the difference between the appraised value and the remaining mortgage debt?


This is a good point. If someone purchased a house with 20% down to avoid CMHC insurance but the house goes down 20% and then it's time to renew - should the homeowner have to pay CMHC for a 0% down mortgage? As a taxpayer who is taking on the risk I kind of think they should. feels like kicking someone when they're down though.


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## none

I really want to like this woman but she makes it difficult. She certainly comes off as a RE shill and only focuses on the upside of real estate.

http://www.moneysense.ca/2013/02/20/video-how-your-home-can-save-you-at-tax-time/


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## sags

I have a feelng that in one years time, we will be discussing either.............

The housing "crash" was greatly overstated, values have held up well and continue to rise

Or...........

We didn't think it would be this bad.


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## andrewf

If we think the crash was overstated and prices stayed high, then prices are still too high... It's wishful thinking that overvaluation goes away gently and quickly. You get one or the other.


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## NotMe

My guess is a year from now people will still be discussing the crash, Garth will be saying it's coming, and the lineup at Starbucks at First Canadian Place will still be a thousand feet deep at 8:30am.


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## NotMe

none said:


> I've never bought into this line of thinking. To put it in the context of buying and selling stocks: to insinuate that a $10 transaction fee somehow insulated you from a dramatic decline in stock price is silly. I've never understood this whole 'paper loss vs real loss' it doesn't really make much sense.
> 
> If I bought AAPL at $700 and it is currently trading at $450 I would not feel very good even if I didn't sell it.


But what if you bought AAPL at $200, saw it go up to $700, and then have it now at $450. I think I'd still feel pretty good about it, even though I could have gotten more.


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## none

Exactly. Ultimately, the only things that really matter are what you bought it at and what the current value of the asset is.

I have a friend who is underwater on her mortgage for her Condo in Vancouver but doesn't want to sell to 'lock in her loss'. Of course condos are just going to go down further so really it's a silly way to think.


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## NotMe

none said:


> Exactly. Ultimately, the only things that really matter are what you bought it at and what the current value of the asset is.
> 
> I have a friend who is underwater on her mortgage for her Condo in Vancouver but doesn't want to sell to 'lock in her loss'. Of course condos are just going to go down further so really it's a silly way to think.


It's very hard to predict the future, no? I actually agree with you that I think that will happen, but it doesn't mean the opposite can't happen either.


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## none

It kind of does because affordability and buyers are close to maxed out. For example, it's mathematically possible for RE to drop 50% but not so for it to increase by another 50%.

ANyway, it's probabilities and partition between the upside and downside is not in the middle of the distribution.


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## none

Well a thank you for giving her the idea for the column would have been nice: http://www.moneysense.ca/2013/03/28/real-estate-vs-the-stock-market/

Unfortunately she missed some very significant costs to home ownership. I wrote the editors and offered to write a feature. We'll see if they're interested.


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## jamesbe

Yeah, I was cash flow positive until I had to paint and replacing flooring. Nothing is black and white.


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## sags

None..............bear in mind the author is a real estate agent.


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## none

sags said:


> None..............bear in mind the author is a real estate agent.


I know but I kind of thought she was just being an optimist despite the overwhelming evidence.

With her admission that she intentionally omitted important details to bias her story in favour of home ownership I honestly don't think she should be writing for a magazine that plays to help Canadians with their finances. 

She outright lied to people and if anyone buys a housebased on her advice they have every right to hold her, and the editors of moneysense, responsible.


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## blin10

lol.......


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## Cal

none - I have often wondered myself how many RE agents, promoters, builders will be sued for the 'investment' claims they have made to buyers. Personally I think their governing bodies should hold the agents/builders responsible, assuming they want to be recognized as professionals, but am doubtful much will happen at all.


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## HaroldCrump

sags said:


> A comparison of what 4 million will buy in Vancouver vs Atlanta, Georgia.


Roswell is not Atlanta, just to clarify.
Houses in Roswell, and the new John's Creek, are a _lot_ nicer than in the Atlanta neighborhoods.
Try comparing the Vancouver shack with something in the Virginia Highlands suburb of Atlanta, for example.

But yes, in general, houses in the S & SE US are nicer, larger, and better than Vancouver, GTA, etc. $-for$.
I believe even at the height of the US bubble in 2006-2007, US homes in major cosmopolitan centers were far better value than similar priced properties in GVA, GTA, etc.


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## fraser

The crash IS NOT here, real estate has NOT dropped 50%. This is pure fear mongering.

There are market adjustments, just as there always have been. These adjustments will vary by city, by type of property, and by the value of the property.

Will there be an adjustment. Perhaps...but IMHO it will very much depend on interest rates. These look very stable in the short term.

We sold last August. Travelled for seven months and are now going into a furnished rental. Not sure whether to buy in Calgary right now so we are being cautious. Indicators are mediocre here re oil prices, US oil consumption vs production increases, capital investment, etc. so we may wait a few months. Besides, we have not seen what we want in a downsized property. Notwithstanding that, we are still concerned about what impact an increase in interest rates during a five year period will have on home values over the same duration.


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## marina628

My friend just bought a beautiful house in Atlanta Georgia for $68,000 ,practically brand new and 2000 sq ft.I think there will always be areas with higher risks of market correction but there are also many locations you can buy and still make a good investment.I didn't ask her specific numbers but she said they have over 20% Cap rate.She bought another house for $37,000 that she is renting for $1100 a month which is absolutely crazy compared to what we get for rentals here in GTA area .


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## none

I think the cherry picked Richmond quote is a little extreme.

Looks like the Victoria sales for march 2013 are 20% lower than march 2012.

First sales drop and prices follow about a year later.


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## andrewf

We haven't seen much change in price yet--only slight declines in Vancouver/Victoria. The correction is in its beginning stages.


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## NotMe

andrewf said:


> "The correction is in its beginning stages."


-Garth Turner, March 2008


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## sags

The 40 year mortgage..........no downpayment........low interest rates..........spoiled that prediction.


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## HaroldCrump

NotMe said:


> -Garth Turner, March 2008


And 2006, and 2002.


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## Addy

marina628 said:


> She bought another house for $37,000 that she is renting for $1100 a month which is absolutely crazy compared to what we get for rentals here in GTA area .


Holy smokes, how does your friend find these deals? Any cheap house I've seen in the US is not easily rentable.


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## andrewf

I'm not Garth. 

Sorry--am I missing something? Sales and prices are declining. To me, that means that housing is correcting.


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## Cal

In the GTA, sales are down, prices not yet...


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## none

http://www.theglobeandmail.com/repo...nto-and-vancouver-march-2013/article10755387/
Prices generally lag sales by 12-18 months. This is a shot across the bow to get the hell out.


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## andrewf

Cal said:


> In the GTA, sales are down, prices not yet...


Technically, prices have been declining slightly in Toronto for the past few months per Teranet. Nothing significant yet.


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## none

Look at this: OUCH! http://bc.ctvnews.ca/whistler-real-estate-prices-plummet-up-to-68-per-cent-1.1221964


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## kcowan

none said:


> Look at this: OUCH! http://bc.ctvnews.ca/whistler-real-estate-prices-plummet-up-to-68-per-cent-1.1221964


This is unrelated to the property values in cities. Whistler and Salt Spring are influenced largely by the US market for 2nd and 3rd properties. They have been correcting since the US bubble popped.

And the whole Phase 2 thing in Whistler is bizarre. Essentially you are forced to finance the market for rental properties.


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## sags

Probably a quick, sharp correction in housing prices would be best overall, to enable a reset of the construction industry.

A slow, steady decline of home prices will drive away buyers for longer periods of times..........as nobody really wants to buy a home that will be worth less in a few months. It looks like that is what is happening though.........not an outright crash but a steady drip, drip, drip downwards that will in aggregage have "crash" numbers over a long span of time.

It irritates people when they learn the people moving into a nicer home down the road paid considerably less than they paid for their home.

There are exceptions of course. There are areas in most cities that are much sought after, expensive, and attract buyers who are more interested in obtaining the perfect property for them than how much it cost them to buy it.


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## jamesbe

If one forgets about it as an investment and thinks about it as a home, who cares.

For my rental, I care. For my home, don't really care, plan on staying for awhile and I just pay for it while I'm here.

I do see a correction in Ottawa despite what most will tell you. I have a friend that bought a house in 2010 for $289 he did a bunch of upgrades and it's been sitting on the market for $275 now for 3 months.

Last year I could have got $189 for my condo in a few days, now it looks like I'm going to be selling for below 180 if not a lot less if I can sell at all. Some similar units sold for $170 that were bought 2 years ago for much more.


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## Charlie

kcowan said:


> And the whole Phase 2 thing in Whistler is bizarre. Essentially you are forced to finance the market for rental properties.


These are basically places zoned as hotels that they were able to sell as units. The Westin and others were sold this way. The returns have typically been dismal as management fees and other charges sup up most of the revenue. They're hotel stays, not long term rentals. Vancouver has a few of these, and, again, they've been lousy investments for the most part. 

They're not representative of the real estate market in any traditional sense.


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## none

sags said:


> Probably a quick, sharp correction in housing prices would be best overall, to enable a reset of the construction industry.
> A slow, steady decline of home prices will drive away buyers for longer periods of times..........as nobody really wants to buy a home that will be worth less in a few months. It looks like that is what is happening though.........not an outright crash but a steady drip, drip, drip downwards that will in aggregage have "crash" numbers over a long span of time.
> It irritates people when they learn the people moving into a nicer home down the road paid considerably less than they paid for their home.
> There are exceptions of course. There are areas in most cities that are much sought after, expensive, and attract buyers who are more interested in obtaining the perfect property for them than how much it cost them to buy it.


I agree - I think the 'slow melt' could cause a japan like condition where people just don't want to buy real estate at all any more and it feeds on itself and this slow decline I think makes people hang onto their houses for longer hoping for a correction that never comes at the result is they end up losing more over the long term. RE estate looks a lot different going down (or being flat) compared to going up. I think of how my life has changed by making 100K on my house. A little bit, not too much but I shudder to think how it would change if I lost 100K - OUCH.

Anyway, time will tell - it's a no brainer from where I am sitting.


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## andrewf

James, it doesn't matter so much if you already own. But for a first time buyer, buying at the peak could be financially disastrous. I think people buying such a significant asset with such little consideration of the risks are being reckless.


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## blin10

none is not ganna like it.... http://www.theglobeandmail.com/repo...markets-in-early-2013-report/article10763649/


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## none

Haha!

That doesn't bother me at all. The observation of increased prices when sales fall is due to two things: 1) the lagginess of prices to decreased sales; and 2) lower volume increases the influence of high sales on the mean. That's why the US uses medians, Canada is dumb that way.


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## blin10

yaya sure mr know it all


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## none

Believe it or not I've given this a lot of thought. 1) I'm a scientist; and 2) If i'm asked to drop $600,000 on an asset you bet your sweet *** I'm going to research it thoroughly.


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## andrewf

That report quotes y/y price change. Prices peaked in many markets during spring 2012, so y/y price increases don't say much about what has happened over the past year.


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## GoldStone

Can we trust y/y price reports prepared by the real estate cartel? They have a massive conflict of interest and a strong incentive to "massage" the data.

I wonder if any independent party audits their reports.


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## blin10

none said:


> Believe it or not I've given this a lot of thought. 1) I'm a scientist; and 2) If i'm asked to drop $600,000 on an asset you bet your sweet *** I'm going to research it thoroughly.


there's huge flaw with that mentality... it's like with a stock market, you can research all you want, find the best company to invest in your opinion, you buy it and it tanks hard... also just because you're a scientist it don't mean a thing, there are a ton of people who specialize in actual real estate financing, people who manage billion dollar portfolios and they are wrong a lot times... hate people who think they're smarter then everyone else (general statement, not towards you)


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## none

I agree with you to a certain extent, there is always uncertainty. Could house prices increase another 20%... maybe.. could they double again? Absolutely not because even at the low interest rates we are at the edge of affordability. On the other side, I see a much higher probability density on the side of price declines.

I think when evaluating a company it's hard to obtain the most relevant information and I think we have a lot of it for housing in the current environment so a general prediction of what is probably going to happen I think doesn't nearly have the level of uncertainty compared to some stock evaluations.

I'm a fan of Paul Krugman. I think this is a short and great article predicting the US house crash well before it actually happened. http://www.nytimes.com/2005/08/08/opinion/08krugman.html?_r=0


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## doctrine

Why would the real estate price crash if incomes, employment and mortgage costs (interest rates) are all the same or better over the last several years? My opinion is there will have to be a trigger event before any "crash" happens. People are paying their mortgages. It's a little harder to qualify for the big ones but not that hard for the average mortgage. Life goes on. It will take a million or more Canadians to go from employed to unemployed for real estate prices to move dramatically.


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## andrewf

Statscan should really take over real estate statistics. CREA's data reporting is terribly biased. They compare signed deals this year to closed transactions the previous year. Thus, since some deals fall through, their year/year sales numbers are systematically biased to show an increase. This is pretty obvious stuff, so the deception is intentional.


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## none

you should read the krugman article I posted directly above as it explains why - with renting so much cheaper than owning - without the guarantee of gains the bubble deflates - speculation has been driving the Canadian housing market. Once people realize how much money they are losing by owning (due to prices not increasing - that's all it takes) then the market starts to hiss which is what we are starting to see now.


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## andrewf

doctrine said:


> Why would the real estate price crash if incomes, employment and mortgage costs (interest rates) are all the same or better over the last several years? My opinion is there will have to be a trigger event before any "crash" happens. People are paying their mortgages. It's a little harder to qualify for the big ones but not that hard for the average mortgage. Life goes on. It will take a million or more Canadians to go from employed to unemployed for real estate prices to move dramatically.


Why did stocks crash in 2000?

Markets aren't perfectly rational, and often momentum leads to prices being bid up continually until no 'greater fools' remain to sustain the market.


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## Cal

It could simply come to supply and demand.

Eventually there will be a tipping point of some sort.


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## Sampson

We need our own regression analysis.

Own a house? Yes or no?
Believe in a pending housing crash? Yes or no?

What do you think the r-squared on this would be?


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## none

I think I'm now on Garth's shi!t list. I posted the following which got deleted. I stand by this statement:
_*
Although I agree with Garth as it pertains to the housing market, I have to say, there are few things sadder than an old man trying to sounds cool and hip.

Garth: ” It’s cool, and like Psy, likely going nowhere.”

Dave Grohl: “Gangnam Style” by Psy is one of his favorite songs from the past decade.”

I’ll go with Garth about housing, I’ll go with Dave with what is cool (and I agree with the latter anyway).*_


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## HaroldCrump

Why are you wasting your time on Garth's blog?
He doesn't want your opinion or feedback.
He doesn't sound like a guy that takes a difference of opinion well.
His whole persona is built around one bull-headed idea that he has been pumping for nearly a decade now.


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## andrewf

Especially the comments, which don't get much more illuminating than: "Fiiiiirst!"


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## mich123

Here is a good article to sum up the discussion:

http://business.financialpost.com/2013/04/05/canadian-housing-downturn/?__lsa=11f2-13d1


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## jamesbe

I was at the bank today. Mortgage person there told me that the appraisers were really coming in low on their appraisals and a lot of deals were falling through because of it.


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## none

mich123 said:


> Here is a good article to sum up the discussion:
> 
> http://business.financialpost.com/2013/04/05/canadian-housing-downturn/?__lsa=11f2-13d1


The closing line of the article:
"_*Ultimately, the question is whether the government can engineer a more gradual housing price decline that won’t trigger a recession. Rabidoux says good luck with that. “Typically when you have a distortion in the economy, it is rarely painless to rebalance it. We’re in for a relatively painful period*_.”


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## sags

From the article in the linked news item..........it doesn't sound like the RBC mortgage departments are being affected.......but the revelation may be indicative of the bank's outlook for the future. If they were projecting prosperous times ahead, would they be so anxious to save a little money at the expense of their reputation among Canadians?

In any event, even if it does save them money.......they appear to be totally ignoring visa requirements and the law surrounding foreign workers.......not to mention causing the government some discomfort.

http://www.cbc.ca/news/canada/british-columbia/story/2013/04/05/bc-rbc-foreign-workers.html?cmp=rss

As one comment noted..........when you can't move the business to a foreign country for cheap labour........you bring them here.


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## canabiz

I was at Brad J. Lamb's real estate seminar in Ottawa yesterday as I got a bit of time to burn. He is a well-known Toronto condo developer/realtor/promoter.

I had to leave after 1.5 hrs for the next appointment (it was scheduled to run for 3 hours) but it looks like he was pushing sales for one of his project in Ottawa called SoBa (corner of Bank and Catherine)

The event was fairly well-attended but I did see a fair number of real estate agents in the crowd. Based on comments on another forum, as of last November, they sold 1/3 of the units and as is the case with new condo build, they need to sell at least 70% of the units before breaking ground, which they hope to do by this summer.

Will be interesting to see how this plays out.


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