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

[mpt]

13 minutes ago, LolClarkson said:

Well prices are down 17% already.

 

I know prices will go down over 30%. Its virtually guaranteed.

 

 

So going up over 30% in one year, then going down 30% the next is a market crash?  News to me.  Can't be called a crash when prices return back to normal levels.   Just sucks for all those people who panicked and overpaid for all these homes

[MaxVerstappen33]

40 minutes ago, mpt said:

So going up over 30% in one year, then going down 30% the next is a market crash?  News to me.  Can't be called a crash when prices return back to normal levels.  

Quote

Just sucks for all those people who panicked and overpaid for all these homes

 

Prices went up for 8 years with no correction. Markets that don't correct turn into bubbles. Bubbles don't correct. They crash. The crash has barely just started.

 

You were the one who came up with 30%. I said prices will be way below 30% when its all said and done. And 30% below the peak is nowhere near normal for a city with a median income of $43,000.

Quote

Just sucks for all those people who panicked and overpaid for all these homes

This thread is chalked full of people who weeks ago, were laughing at me for suggesting that prices would fall. Now you are saying "oh man people over paid". When before the fall, you would have said that prices aren't going to fall.

 

And an epic crash is just what the doctor ordered for regular British Colombians.

 

 

[Naslund]

15 hours ago, Realtor Rod said:

16 hours ago, LolClarkson said:

Are you aware that prices have already fallen hard and that sales have dried up ?

 

As Vancouver Luxury Home Sales Plunge 65%, Chinese Buyers Move To Toronto

Zero Hedge‎ - 12 hours ago

If there was any doubt about the Vancouver housing bubble bursting, and there really ...

 

"The Deals Are Collapsing" - Vancouver's Housing Bubble Has Burst ...

www.zerohedge.com/.../deals-are-collapsing-vancouvers-housing-bubble-has-just-bur...

Aug 3, 2016 - As a new dawn breaks in Metro Vancouver's real estate market, realty companies are reporting the first anecdotes of deals falling through as ...

 

 

Lolclarkson,

 

It will be interesting to see if there will be a ripple effect on other areas in lower mainland, and townhouse and condos.  Sincerely I hope you are right.  Consumer debt is continuing to go up so things are not looking good.  People are lucky that US is stalling from increasing their rate. 

 

To me, I would be okay if the real estate market is booming due to local factors.  It really scares me how foreigners are buying up properties in Canada. In fact, I would like to see more Canadians buying up foreign real estates instead.

 

I tried to just quote your post but don't know why some other post got attached too...

 

 

 

[taxi]

1 hour ago, LolClarkson said:

Well prices are down 17% already.

 

I know prices will go down over 30%. Its virtually guaranteed.

 

 

Nothing is guaranteed in this market.

[mpt]

34 minutes ago, LolClarkson said:

Prices went up for 8 years with no correction. Markets that don't correct turn into bubbles. Bubbles don't correct. They crash. The crash has barely just started.

 

You were the one who came up with 30%. I said prices will be way below 30% when its all said and done. And 30% below the peak is nowhere near normal for a city with a median income of $43,000.

This thread is chalked full of people who weeks ago, were laughing at me for suggesting that prices would fall. Now you are saying "oh man people over paid". When before the fall, you would have said that prices aren't going to fall.

 

And an epic crash is just what the doctor ordered for regular British Colombians.

 

 

As long as people have money and want to live in Vancouver prices will stay high.  Maybe we just have different definitions of the word 'crash' and I'll admit I don't know what the actual definition of a crash is. Do I believe that the average Vancouver price will ever be under 500k again?  Nope. Will it drop below 1,000,000?  It's a distinct possibility.

[Realtor Rod]

4 hours ago, LolClarkson said:

I am trying to find the simplest explanation but learn something about bank leverage to equity ratios. When prices rise for 8 years, banks "assets" keep rising. Which means they have more "equity" to lend against. So they extend more credit. Which makes prices rise more and so on. This is how we get to crazy house prices. It all works great while prices are rising. But when they fall 17% in one month, the leverage works in reverse. A 10% fall in price could easily drown a bank. And they did in the US and they will here.

 

I said at the start of the thread that Canadian banks will be in trouble before this is over. I am sticking to it.

 

and for the record, Canadian banks got a back door bailout in 2008

Why are Canadian banks in trouble? Nearly every mortgage is insured by CMHC. 

[Realtor Rod]

3 hours ago, LolClarkson said:

Well prices are down 17% already.

 

I know prices will go down over 30%. Its virtually guaranteed.

 

 

Where are you getting 17% from? What time frame compared to what?

[MaxVerstappen33]

6 hours ago, mpt said:

As long as people have money and want to live in Vancouver prices will stay high.  Maybe we just have different definitions of the word 'crash' and I'll admit I don't know what the actual definition of a crash is. Do I believe that the average Vancouver price will ever be under 500k again?  Nope. Will it drop below 1,000,000?  It's a distinct possibility.

The definition of crash is the charts in the first page.

[MaxVerstappen33]

4 hours ago, Realtor Rod said:

Why are Canadian banks in trouble? Nearly every mortgage is insured by CMHC. 

CMHC is the Fanny Freddie of Canada. They went under. Bankrupt.

[Realtor Rod]

1 hour ago, LolClarkson said:

CMHC is the Fanny Freddie of Canada. They went under. Bankrupt.

CMHC is not bankrupt. They also are not related. One is a lender, one is an insurer. I still await your 17% numbers. I think you may be trolling for entertainment. 

[mpt]

29 minutes ago, Realtor Rod said:

CMHC is not bankrupt. They also are not related. One is a lender, one is an insurer. I still await your 17% numbers. I think you may be trolling for entertainment. 

I did read an article recently in the huffington post about Vancouver average house prices are down 17.9% since July when it hit its peak.  Not sure if you can use peak numbers to really accurately describe a market.  Average over a year or even a quarter is much more accurate.  Heck in real estate the median might even be considered a better indicator.

[Warhippy]

30 minutes ago, Realtor Rod said:

CMHC is not bankrupt. They also are not related. One is a lender, one is an insurer. I still await your 17% numbers. I think you may be trolling for entertainment. 

You can't argue though that with a rate increase of even 1.5% reported to be enough to bury tens of thousands who have been living beyond their means and not acting their wage for home ownership that CHMHC as an insurance agency will be affected.

 

An increase of 2% to 3% would be enough to force (a reported) near 200,000+ Canadians with mortgages backed by CMHC to either sell or claim bankruptcy due to high personal debt levels

 

The funny thing about insurance companies is the fact that they cannot insure their claims.  If they don't have enough scratch in the pool come the moment of a risk or peril they go under.

 

CMHC is no different.  The government would be forced to bail out CMHC much like they "didn't" in 2008; the fall out would be the money owed banks who would also take a huge hit as well.

 

The issue with redundant systems like we have in canada is inevitably there will be a scenario in which one failure results in a cascade of failures.  Much like the first global issue did that started in Thailand and resulted in the collapse of Icelands banking system.  Long chains of failure my man.

 

Can it happen?  Yes

 

Will it?  It's actually looking more feasible now than 2 months ago so who knows

[Warhippy]

4 minutes ago, mpt said:

I did read an article recently in the huffington post about Vancouver average house prices are down 17.9% since July when it hit its peak.  Not sure if you can use peak numbers to really accurately describe a market.  Average over a year or even a quarter is much more accurate.  Heck in real estate the median might even be considered a better indicator.

Look above and beyond housing prices.

 

The bigger issue is personal debt including mortgages.  People purchase beyond their means due to low interest rates and lending.  They then continue to not act their wage and leverage that equity to buy cars go on trips and rack up enormous debt levels.  $1.68 for debt per every $1.00 of income on average per household in Canada

 

They weigh assets against debt to marginalize potential loss but never factor in the potential loss of equity in the event property values or homes depreciate faster than they can control.

 

We're close to that perfect storm in regards to collapse.

 

people consume, cannot control themselves, live beyond their means, housing prices drop, they lose that equity and are now unable to pay off debt in the same way or fund their lifestyle.  Then a potential rate increase comes up and 

 

Boom

 

Ya we're seeing hundreds of thousands claiming bankruptcy

 

CMHC as an insurer cannot possibly cope with that kind of potential loss without failure.

[Realtor Rod]

22 minutes ago, Warhippy said:

You can't argue though that with a rate increase of even 1.5% reported to be enough to bury tens of thousands who have been living beyond their means and not acting their wage for home ownership that CHMHC as an insurance agency will be affected.

 

An increase of 2% to 3% would be enough to force (a reported) near 200,000+ Canadians with mortgages backed by CMHC to either sell or claim bankruptcy due to high personal debt levels

 

The funny thing about insurance companies is the fact that they cannot insure their claims.  If they don't have enough scratch in the pool come the moment of a risk or peril they go under.

 

CMHC is no different.  The government would be forced to bail out CMHC much like they "didn't" in 2008; the fall out would be the money owed banks who would also take a huge hit as well.

 

The issue with redundant systems like we have in canada is inevitably there will be a scenario in which one failure results in a cascade of failures.  Much like the first global issue did that started in Thailand and resulted in the collapse of Icelands banking system.  Long chains of failure my man.

 

Can it happen?  Yes

 

Will it?  It's actually looking more feasible now than 2 months ago so who knows

You know the CMHC website is a .gc.ca website, right? 

 

The government also controls the prime interest rate. 

 

It isnt going to happen.

[Warhippy]

55 minutes ago, Realtor Rod said:

You know the CMHC website is a .gc.ca website, right? 

 

The government also controls the prime interest rate. 

 

It isnt going to happen.

And

 

the Titanic was unsinkable 

A black man would never be president 

Man would never fly

Luongo could never be traded with that contract 

 

Except of course that it all happened.

 

I pointed out quite clearly the government would have to bail them out.

 

But to sit and say it will never happen is quite silly

[MaxVerstappen33]

2 hours ago, Realtor Rod said:

CMHC is not bankrupt. They also are not related. One is a lender, one is an insurer. I still await your 17% numbers. I think you may be trolling for entertainment. 

CMHC is not bankrupt yet.

 

I was just informing you that the equivalent to the CMHC in the US was Fanny and Freddie. They were govt backed mortgage insurers. When the bubble burst in the US, the govt insurers went bankrupt. Which shows that your claim that the banks in Canada will not be in trouble because mortgages are backed by the CMHC , is wrong.

 

And the 17%

 

[MaxVerstappen33]

1 hour ago, Realtor Rod said:

You know the CMHC website is a .gc.ca website, right? 

 

The government also controls the prime interest rate. 

 

It isnt going to happen.

These are the exact kinds of government moral hazards that guarantee a crash and an eventual wipeout of the entities involved. It cannot work. It will not work. CMHC will get a huge bailout sometime in the next 5 years. It is baked into the cake for the reasons you are pointing out.

 

Definition of 'Moral Hazard' - The Economic Times

economictimes.indiatimes.com › Definitions › Economy

Definition: Moral hazard is a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost. It arises when both the parties have incomplete information about each other.

[taxi]

11 hours ago, mpt said:

As long as people have money and want to live in Vancouver prices will stay high.  Maybe we just have different definitions of the word 'crash' and I'll admit I don't know what the actual definition of a crash is. Do I believe that the average Vancouver price will ever be under 500k again?  Nope. Will it drop below 1,000,000?  It's a distinct possibility.

There is definitely truth to this. There's no way that houses will ever drop to below $500k....at least as long as interest rates stay low. 

 

IMO the reality is likely to fall somewhere between the doom and gloom that LOLClarkson is predicting and the rosey future that Realtor Rod is predicting. Vancouver, in terms of demand, has much more in common with Seattle or San Francisco than Phoenix or Miami. Places like Seattle saw a drop in their prices, but nothing catostrophic. It also wasn't Seattle causing the banks to go bankrupt in the USA. It was places like Las Vegas, where half the population essentially walked away from their homes.

 

In Vancouver, I think we'll see another 25-35% drop followed by more reasonable increases. Does that count as a "correction" or a "crash"? Who knows. Depends if you include that insanity that happened at the beginning of 2016 as normal. The issue is that currently houses are out of reach for even high earners. A 30% or so drop would bring them back into reach, which would stimulate demand and stop a total bottoming out.

[MaxVerstappen33]

37 minutes ago, Warhippy said:

And

 

the Titanic was unsinkable 

A black man would never be president 

Man would never fly

Luongo could never be traded with that contract 

 

Except of course that it all happened.

 

I pointed out quite clearly the government would have to bail them out.

 

But to sit and say it will never happen is quite silly

The CMHC is a little different than the  other examples because its mission is self defeating. It removes the price signal that would otherwise result in the market self correcting itself. It takes on risk that nobody else wanted to take.

 

It all works great when prices are rising. But it cannot work when prices start to fall.

[Realtor Rod]

3 hours ago, LolClarkson said:

These are the exact kinds of government moral hazards that guarantee a crash and an eventual wipeout of the entities involved. It cannot work. It will not work. CMHC will get a huge bailout sometime in the next 5 years. It is baked into the cake for the reasons you are pointing out.

 

Definition of 'Moral Hazard' - The Economic Times

economictimes.indiatimes.com › Definitions › Economy

Definition: Moral hazard is a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost. It arises when both the parties have incomplete information about each other.

CMHC has been around 70 years, but as hippy pointed out, anything can happen.