When do you think the Vancouver housing bubble will explode and come crashing down ?

[Scruffy05]

1 hour ago, Realtor Rod said:

That's your opinion. Under 20% the mortgage is insured by CMHC. I might see 8 a year with over 20% down, all others are under. Most borrow the mandatory 5%. So you see, it's already happening where few can afford even the 5%. Line of credits or bank of mom and dad. Measly? . The average house price in the FraserFraser Valley is 670k. That 33k is required. That is not measly for any family. Renting is not any cheaper, as prices go up, rents go upup. 

I must respectfully disagree with you on your last point. Home prices and rents are very weakly correlated with a pretty significant phase delay as the market drivers for both are significantly different. 

 

Specifically in Vancouver proper the price-to-rent ratio is well over 30 and, in some places, well over 40. And the ratio only includes the purchase price of the house, not the cost of the capital (mortgage) or the insurance or the property taxes or the maintenance costs- none of which the renter pays.

 

If you were to spin it out, at the current cap rate (related to the price-to-rent ratio), and associating ALL costs, after 25 year the rent comes out ahead in net worth (investing all monies not paid into an ETF and assuming historic average return rates and realizing the strong correlation between home prices and capital markets) by about 25-30%, and that is assuming there is no housing correction. 

 

 

*Source: Microsoft excel and about 5 minutes.

Assumptions:

- 3% Mortgage rate never rising (unlikely)

- 10% down payment... it gets worse at 5% for the home buyer

- squatting in the house, as every time you buy and sell incurs transfer fees

[Scruffy05]

1 hour ago, Realtor Rod said:

That's your opinion. Under 20% the mortgage is insured by CMHC. I might see 8 a year with over 20% down, all others are under. Most borrow the mandatory 5%. So you see, it's already happening where few can afford even the 5%. Line of credits or bank of mom and dad. Measly? . The average house price in the FraserFraser Valley is 670k. That 33k is required. That is not measly for any family. Renting is not any cheaper, as prices go up, rents go upup. 

Oh, and as for how to save for the down payment? Live cheap, save money, prioritize spending and other priorities. Even with all that, if you cannot afford a house? Well, then you cannot afford a house. Home ownership is not a right.

[Realtor Rod]

5 hours ago, Wild Sean Monahan said:

http://www.theglobeandmail.com/report-on-business/top-business-stories/how-does-the-vancouver-toronto-housing-party-end-not-badly-td-says/article30489888/?reqid=c8ab6c72-ba58-41c5-9802-86c0c120be71

 

 

What I read when I see this...  'your house value will decline soon, better sell and borrow more money for your next purchase' 

[Realtor Rod]

1 hour ago, Scruffy05 said:

Oh, and as for how to save for the down payment? Live cheap, save money, prioritize spending and other priorities. Even with all that, if you cannot afford a house? Well, then you cannot afford a house. Home ownership is not a right.

The formula you mentioned above works, unfortunately less than 1% apply it. 

[Sean Monahan]

2 minutes ago, Realtor Rod said:

What I read when I see this...  'your house value will decline soon, better sell and borrow more money for your next purchase' 

Definitely a bias to consider for sure. I'm just trying to add something relevant to the conversation 

 

As a young Vancouver local (born and raised) it bothers me somewhat to see the market going so crazy. Then again, I've never really planned on living here anyway. 

[Realtor Rod]

3 hours ago, Wild Sean Monahan said:

Definitely a bias to consider for sure. I'm just trying to add something relevant to the conversation 

 

As a young Vancouver local (born and raised) it bothers me somewhat to see the market going so crazy. Then again, I've never really planned on living here anyway. 

I feel for you, first time buyer's in Vancouver are more rare the Bigfoot. It was a good article to post, I just read between the lines a little. It could correct in a year but why didn't TD predict this was going to happen 6 months ago? 

[Sean Monahan]

44 minutes ago, Realtor Rod said:

I feel for you, first time buyer's in Vancouver are more rare the Bigfoot. It was a good article to post, I just read between the lines a little. It could correct in a year but why didn't TD predict this was going to happen 6 months ago? 

Maybe I just wasn't as interested in the topic 6 months ago but it really seems to have picked up steam lately. It was definitely a topic of discussion and debate some time ago but from where i stand it seems to have really blown up just these last couple months. I think that house "owned" by the "student" really set a lot of people off.

[Realtor Rod]

20 minutes ago, Wild Sean Monahan said:

Maybe I just wasn't as interested in the topic 6 months ago but it really seems to have picked up steam lately. It was definitely a topic of discussion and debate some time ago but from where i stand it seems to have really blown up just these last couple months. I think that house "owned" by the "student" really set a lot of people off.

Absolutely, but it wasn't cut and dry.   Parents put it in their name to avoid PPT as the child was a first time home buyer. Not that uncommon among the affluent. 

[Sean Monahan]

1 hour ago, Realtor Rod said:

Absolutely, but it wasn't cut and dry.   Parents put it in their name to avoid PPT as the child was a first time home buyer. Not that uncommon among the affluent. 

Yeah that's what I read. I think a lot of people just read the headlines and got pissed off

[Grapefruits]

On 6/17/2016 at 8:26 PM, Wild Sean Monahan said:

Yeah that's what I read. I think a lot of people just read the headlines and got pissed off

That's what the media was hoping for, and they got it.

[Sean Monahan]

29 minutes ago, Grapefruits said:

That's what the media was hoping for, and they got it.

Yeah, I don't like the foreign investment as it  does play a role in driving up the prices (it's debatable how much effect it has) but I thought it was kind of ridiculous for the province to run that. It was for shock value and little more than to make local Vancouverites resent Asian buyers. 

[ShakyWalton]

Im saving up for my dream home....

 

and only $5,500,000...seems they cant wait for the tenants to get out..

 

This is a perfect opportunity to buy a large oversized lot in the Dunbar area. This property is located in a central location near shops, transit and much more. Lord Byng Secondary School catchment and close to St George and Crofton House private school. Currently tenanted with lease ending at the end of July 2016.

 

 

 

[Grapefruits]

I now get an Agent hitting my house every 3 days or so.  Currently I can pretty much double my money compared to what I paid 5 years ago.  I could walk away mortgage free with money in the bank and a rather nice place if I moved a few hours North.

 

Damn tempting I tell ya...

[HKSR]

Looks like the experts are predicting it as well.... the crash... it's coming! 

 

http://business.financialpost.com/news/economy/is-canadas-housing-bubble-about-to-burst

 

But wait... what's this?  The article is from 2010... but the bubble burst is coming... right?

 

With housing prices and cost of living as high as they are, coupled with relatively low wages, and terrible transportation and congestion of traffic, why haven't YOU moved away?  Your reasons for staying are the same reasons why the housing market here will never crash. 

 

And what's with this talk about a $1m home?  What does $1m buy you these days?  Most desirable homes or land in desirable locations are $1.5m+.  A desirable home in a desirable location is pushing close to $2m now. 

A 20% - 30% correction does nothing to the affordability of these homes. 

[MaxVerstappen33]

On 6/17/2016 at 1:00 PM, Scruffy05 said:

I must respectfully disagree with you on your last point. Home prices and rents are very weakly correlated with a pretty significant phase delay as the market drivers for both are significantly different. 

 

Specifically in Vancouver proper the price-to-rent ratio is well over 30 and, in some places, well over 40. And the ratio only includes the purchase price of the house, not the cost of the capital (mortgage) or the insurance or the property taxes or the maintenance costs- none of which the renter pays.

 

If you were to spin it out, at the current cap rate (related to the price-to-rent ratio), and associating ALL costs, after 25 year the rent comes out ahead in net worth (investing all monies not paid into an ETF and assuming historic average return rates and realizing the strong correlation between home prices and capital markets) by about 25-30%, and that is assuming there is no housing correction. 

 

 

*Source: Microsoft excel and about 5 minutes.

Assumptions:

- 3% Mortgage rate never rising (unlikely)

- 10% down payment... it gets worse at 5% for the home buyer

- squatting in the house, as every time you buy and sell incurs transfer fees

Your point about rent correlation is valid and worth repeating. Property owners cannot just index their rent price to the purchase price. They can only charge what the market will pay.

 

Price to rent is some cases is getting so out of range that the property can no longer be classified as an asset. Because the rental return relative to price paid cannot even cover the property taxes and insurance cost less inflation.

[MaxVerstappen33]

On 6/27/2016 at 2:54 PM, HKSR said:

Looks like the experts are predicting it as well.... the crash... it's coming! 

 

http://business.financialpost.com/news/economy/is-canadas-housing-bubble-about-to-burst

 

But wait... what's this?  The article is from 2010... but the bubble burst is coming... right?

 

With housing prices and cost of living as high as they are, coupled with relatively low wages, and terrible transportation and congestion of traffic, why haven't YOU moved away?  Your reasons for staying are the same reasons why the housing market here will never crash. 

 

And what's with this talk about a $1m home?  What does $1m buy you these days?  Most desirable homes or land in desirable locations are $1.5m+.  A desirable home in a desirable location is pushing close to $2m now. 

A 20% - 30% correction does nothing to the affordability of these homes. 

Just because something has not happened yet does not make the claim wrong. Vianna school economist Peter Schiff said all through the early 2000's that Fanny Mae and Freddie Mac would go bankrupt. Because the trajectory of their balance sheet was simply unsustainable. Just because it didn't happen in 2004, 05 06 did not make him wrong.

 

It is the same with this bubble. The facts are the facts. There is nothing special enough in Vancouver to justify these prices. And the market will still exist after the crash. There will still be areas of high demand. Predicting a crash is not analogues to predicting a lack of demand. The crash just wipes out the speculative excess that builds up.

[The Vancouver Connection]

3 minutes ago, LolClarkson said:

Just because something has not happened yet does not make the claim wrong. Vianna school economist Peter Schiff said all through the early 2000's that Fanny Mae and Freddie Mac would go bankrupt. Because the trajectory of their balance sheet was simply unsustainable. Just because it didn't happen in 2004, 05 06 did not make him wrong.

 

It is the same with this bubble. The facts are the facts. There is nothing special enough in Vancouver to justify these prices. And the market will still exist after the crash. There will still be areas of high demand. Predicting a crash is not analogues to predicting a lack of demand. The crash just wipes out the speculative excess that builds up.

you have to the be dumbest guy on CDC, and they're a lot of dumb people on CDC.

[MaxVerstappen33]

On 6/15/2016 at 2:23 PM, literaphile said:

Here's my two cents as a real estate lawyer who does dozens of residential deals every month: there is no "bubble" in the Metro Vancouver area. The prices will eventually stop rising as quickly as they are currently, but I don't think we're going to see a dip in value. Vancouver is a desirable place to live - these values are here to stay. A low interest rate is fueling the growth to some extent, and since virtually every other area in Canada is struggling, I don't see the Bank of Canada raising the prime rate anytime in the near future.

It is sentiments like this that the great financial bubbles are made of.

 

Interest rates fell all through the huge collapses in the US and Japan.

[MaxVerstappen33]

4 minutes ago, The Vancouver Connection said:

you have to the be dumbest guy on CDC, and they're a lot of dumb people on CDC.

Speculative bubbles are wedded in peoples emotions. They are not wedded in fundamentals. As we can see here, this guy just cannot fathom the idea that his dreams of making it rich by selling a house to a greater fool in a couple years may not materialize. He doesn't want to hear it. So he personally attacks me rather than argue with facts.

[MaxVerstappen33]

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