29 Replies to “What Could Possibly Go Wrong?”

  2. I’ve never understood what the Vancouver real estate market was based on.
    What is the economic base there?

  5. It benefits people who worked hard, bought into the local market, did without and paid off their mortgages as soon as possible.
    Gawd I love it when a plan comes together.

  6. I hear there is a tie in with the drug trade too.
    Grow ops and laundering to get the money legit etc.

  7. Our Conservative government has dramatically expanded the use of the CMHC to shore-up prices after the crash a short time ago. I believe we will regret this.

  8. I always thought that the effects of central bank monetary inflation would find its way into the real estate market. It certainly did in the U.S., and much the same will now happen in Canada.
    I understand that it is very common today for young people to take out 35 year mortgages. It’s the only way they can afford to pay these prices for housing. Unfortunately, that means that they will still be making mortgage payments into their fifties and sixties. Your mortgage should normally be paid off by the time you hit fifty so that you can start saving for retirement. Perhaps that sounds old-fashioned, but that strategy enabled my parents to have a decent retirement. How do these people plan on reconciling such conflicting goals? Are they hoping that a government agency will bail them out? Probably.

  9. When I finished paying off my mortgage it was like getting a huge pay raise.
    I try to explain that to people, what it’s like to live debt free, and they usually can’t conceive of it.

  10. Mortgage free in a modest home in a beautiful neighbourhood in the Comox Valley. Paradise.
    You couldn’t pay me enough to make it worthwhile to live in the lower mainland.
    mid island mike

  12. Dennis, so what would you suggest young people do? Rent for their entire lives and never own their own homes?
    I’m a single guy, no kids… so I am currently looking at buying a nice apartment condo which I can easily afford to have paid off by the time I’m 50 or less (if I decided to stay in it that long, which is unlikely).
    For a younger family, with 2 – 3 kids for example… an apartment is not really a great option.
    I think “most” people who take out a 35 year mortgage optimistically plan on paying it off earlier than that through extra payments. (and if I’m not mistaken mortgage rules just changed so 35 years is not an option anymore – 30 is the max). Whether anyone actually will have it paid off early is another story!

  13. Mid Island Mike …
    I am waiting for Hong Kong to discover Vancouver Island. What do you think will happen then? The lower mainland is filling up fast and George Soros owns Mayor Gregor. I don’t know what the long term effect of that will be, but judging by Soro’s age, I don’t think there is a long term anyway.
    I am perched in Nanaimo with a view of the mainland and the fabulous Georgia Strait. If I take out a couple of trees to the right side of my view, I would see the Vancouver skyline as well. Not a rickshaw in sight as yet.

  14. “what would you suggest young people do? Rent for their entire lives and never own their own homes?”
    No need to go without owning a home for their entire lives.
    I thought the birthrate was so low that for every couple there would be 2 empty homes with mortgages paid off to choose from as inheritances after their parents passed away.
    They can live in one of their parents homes until the parents pass.
    Let the immigrants and their children worry about buying the new homes at astronomic prices.
    Anyhow, the “Plung-o-meter” on the chart indicates that the housing bubble is going to collapse back to half or less of current prices and it would probably be prudent to rent until the bubble bursts.

  15. Don’t see the big deal here; outside of Vancouver, you’re looking at 10 year CAGR’s of ~5%. We all think Canada is the best place in the world to live. What did we expect when the rest of the world discovered it as well?
    Put it in perspective – map those real estate prices against the price of gold. Almost no change.

  16. It’s fine that the government has recently tightened up mortgage lending rules, but why did they backstop 35 year mortgages and 90% of home value in the first place? For that matter, why is the government backstopping mortgages at all? There’s a moral hazard here that people seem unaware of.
    Recent home buyers have been able to lock in some pretty decent rates, but how long will that last? My parents were able to get a thirty year mortgage at a fixed rate for the entire term, but that practice ceased after the inflationary 70’s. Now rates are generally reset every five years. By the time our central banks are done with the latest round of currency inflation, you will be lucky to find a mortgage that offers a one year fixed rate.
    Too many people fail to think about the downside of rock bottom interest rates. If prices of commodities like oil, copper, food, metals and so on continue to soar because central banks are destroying the purchasing power of your money, everything you save on your mortgage will be given back at the gas pump and grocery store. And if inflation is allowed to run far enough, your CPP payment will be made in worthless Monopoly money.

  17. Abe: never mind mid Van.Island. What about the Okanagan? Best place in Canada. No mosquitos, not much winter. gorgeous beaches, hot summers, golf 10 months, world class skiing and water skiing. And outside of Kelowna, decent house prices.
    Only problem – not enough jobs for young working families, and not high enough wages.
    But that’s alright, Baby Boom retirees keep leaving the Lower Mainland for our sunny climes

  18. Oz, you are so inspiring. I could never afford to live in Vancouver, prices have always been stupid high. Probably why a lot of folks are commuting from Abbotsford or Chillowack.
    What drives the real estate market, I’m not really sure anymore but I do know that here in Halifax you pay 25 – 35% more to live on the peninsula as opposed to the surbs. Traffic, lack of parking makes going downtown to shop or dine an expensive choice but there are social engineers hovering around saying that the downtown core should be more densely populated with less cars and more public transit. They even have plans, committees and such. Last week there was a couple of city slickers come in from Toronto telling Bluenosers to move downtown, to save the environment or something. Idiots, I hate it when these socialists try to stack us all in the same little boxes that everyone else gets and tell us to be happy as they sit on their deck on their estate or private island.
    These fools can take their high density, high rise, condo living and stick it. This is Canada and there is actually room to live without hearing your neighbour’s dog fart. My wife and I just want to find our portion of this great land (about a 1/4 sq mile or 160 acres), and live in peace.

  19. “…map those real estate prices against the price of gold. Almost no change.”
    Excellent point, Ken. You will find the same result if you price oil in terms of gold.
    The problem is, very few people have any gold at all as part of their savings. Some may have gold shares and funds as part of their investment portfolio, but I daresay they are few and far between. So to the average Joe wage earner who is not being paid in gold, real estate and gasoline is actually quite pricey, because he will generally not be well-protected against inflation.

  20. Toronto has two markets, one that skews the graph way up with a heavy trendy factor, and another one for normal people able to do renos, ride buses to get to train stations, and (gasp) not be within walking distance to Holt Renfrew. Kate’s Theory of Granite Countertops applies.
    Coming from out west I find Toronto remarkably cheap when comparing standards of living. But then again, living here sucks not matter how you frame it.

  21. What I do not understand is how anyone can think this is sustainable? The boomers are starting to retire en masse. Soon they will start dying in great numbers and people will downsizing their living arrangements. There will be more homes than people who need homes.

  22. Can someone explain what morgage insurance is supposed to insure. If you don’t pay your mortgage the bank seizes you house and sells it. They get to sell your house at market value and they get all the money that you put into it before they sell it out from under you. The only concievable way they can loose is if you have no down payment and immediatly go into negetive equity. I am sure that the huge insurence premiums most people pay would more than cover any loss, with a massive profit for the insurence comnpany. CMHC should be a massive cash cow.

  23. A significant number of wealthy Chinese would rather spend their devaluing US dollars all those MalWart shoppers have sent them on Vancouver real estate instead of some piece of foreclosed crap in the USofA.

  24. Lots of cases of canned salmon from last year’s record catch
    are a great investment now will look even better when the lights
    go out and the currency goes to hell in a few years.
    .

  25. A lawyer friend in van explained the cause of the spike a couple of weeks ago:
    Apparently there are a couple (3?) ethnic Chinese groups in china that are BIG believers in owning real estate and have in recent years been aquiring massive amounts of Chinese real estate. This has caused a backlash in china to which the government there has enacted laws limiting how much real estate an individual can own.
    This caused a pent-up demand in china that has moved into other parts of the world and Vancouver is one of those places.
    The US would be a beneficiary, but with the continued weakness of the US dollar the Chinese are holding off in anticipation of being able to buy for lower prices than they are now. (that is also the opinion of a very savvy real estate guy I know locally – he was a pretty big buyer of US land until about two months ago and he has backed off. That said a chinese group just bought the downtown LA Hilton for a paltry 23 million – so they may be starting to buy high quality assets.

  26. “I hear there is a tie in with the drug trade too.
    Grow ops and laundering to get the money legit etc.”
    There’s just as much if not more growing in Quebec with no ridiculous changes in price. I would think that if more houses were being built for growing in/legitimizing the money from such activities it would create a small surplus of housing in the long run which would lower prices.
    Part of it is Asian money, and for that, all hail free trade, all hail the free market.

  27. China is crowded and it’s population is increasing.
    America is relatively uncrowded and it’s population is decreasing.
    China is conquoring America.
    First by driving it into debt and crashing it’s real estate market, while accumulating large amounts of American dollars by selling the American sheeple disposable crap they don’t need. China will buy-up American properties at bargain basement prices with those dollars, then move their wealthy and upper middle class to America as the baby boomers shuffle off to retirement villages. By mid century, or sooner, China will occupy and control America and will have conquored it in the aisles of MalWart without ever firing a shot.

  29. Oz >
    “When I finished paying off my mortgage it was like getting a huge pay raise”.
    No kidding, I’ve done it twice now, the first place was very small & humble and took 10 years, after a few debit free years thereafter, the second took only 4 1/2. I am now in the home I’ll live in forever – en’shalla.
    It’s amazing so many people don’t understand that debt is slavery on more than one level. Debit free, means more money all the time, regardless of your income level. Adjust your lifestyle to below your income level, very simple. People willing to work don’t starve in Canada.

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