Thursday, May 12, 2011

Would you buy this investment?

I have posted the widely available VREB average price chart. Lets forget that this is housing and assume it is a stock that your brother-in-law suggests you buy. You pull up the price chart and see the vertical explosion, the singularity above...would you buy it?

We know all the reasons, HAM, land, low interest rates, CMHC etc etc. However this is the typical chart of a bubble reaching it's final and ultimate pinnacle. Where exactly that final point of maximum lunacy is, no-one knows, but when it reaches that point- the descent is USUALLY fast and furious.

If I had any cojones I would call this the top. In fact maybe I will anyway. Victoria is struggling, the OK is sitting on huge MOI, and in Whistler they had 7 sales last week with a 728 strong inventory. It would take them over two years to sell out at that rate. The Sunshine Coast sits at another huge MOI.

So here it is..I thought RE was over-priced in 2007/8 and a crash was coming. It came and was stopped dead in it's tracks by the government shenanigans. I posted that the crazy low rates and the games with the CMHC may arrest the decline and some people may want to to buy in here. It did and prices were off to the races. With hindsight I should have listened to my own advice.

Now I think we have reached the maximum point of unaffordability. I could be wrong. There could be another huge influx of Chinese investors, or the Government could back-track and reverse the few changes it made to reverse it's own mistakes, or the Bank of Canada, having talked the talk on inflation could cave in completely.

All of that is possible, which is why prognosticating is so hard.

However I think we have reached the high-water mark on average price in Vancouver.

If May is not the highest point, then the blog will shut down in July after the June numbers come out.


  1. congrats fish
    you have been saying this before and proven wrong. Had you stick to your promise, you should have shut this blog down long ago.
    Prices are not coming down from those level (maybe max 10%) but inflation is going up and interest rates are staying low for longer than anybody expects. Soft landing is being engineered and that might take 10 years and more. See you in 10 years, the market might have become affordable again.

  2. The Vancouver market is really tied to China's. If you have time, go visit. The amount of cheap, sometime free money is huge, relative to the W. Van and Richmond.

    So, all the charts, price-to-rent ratios may work in the long run. But we all dead in the long run.

    Bubble hurts, there are more drama to be unfold regardless of which direction the house market goes. Why give up some early? Good health Fish.

  3. Would shutting down the blog constitute capitulation?

    I think the average price can continue to go up as volume dries up, and even though things just seem absolutely bonkers here, I don't think you should be closing the blog if the market continues in its irrational behaviour.

    Please at least re-open the blog after the drop begins?

  4. Something crazy happened to Blogger last night. There were a whole lot of messages which I intended to respond to, but the system kept crashing and now I see all the messages have gone. In case you thought it was me (since some were disparaging) it wasn't.

    Blame Blogger.

    Anon. If I thought my capitulation would help return sanity to the market, believe me I would roll over and wave a white a flag.

    Anyway we still have a ways before July.

  5. 2000-2011 looks a lot like a chart of gold.

  6. A watched pot never boils.

    Allow events to unfold in their own time.

  7. I honnestly believe we need some sort of event to cause a drop. It could be anything that shakes consumer confidence for a few months. Once that happens and we get a few consecutive monthly drops and it starts hitting the MSM, there will be little anyone can do to prevent a collaps.

    The mere fact that Vancouver is one of the only places with signifigant gains makes people think we are special (and for the time being we are) so something has to turn that thinking around.

  8. davers, if enough people write their MLAs you might actually get one of these "events". If I were to write them, it would be to impose useless but symbolic foreign ownership restrictions, taxes, or moratoria. It's an election year; use it wisely.

  9. Nice looking graph. But i am a value investor and like to also get to the "meat of the stock". This company (ie. real estate graph) shows a negative balance sheet. Poor income statement and the price to earning ratio sucks. Trading volume low too. So price too high for a long term hold and too risky for a short term flip. If you play on margin, even riskier. Wonder how many people would consider shorting? ha, ha, ha.

  10. I hope you don't shut down if the numbers are up in June, they very well could be judging by the dailies over at VCI by Paulb.

    I firmly believe this is a liquidity issue, unlimited financing for buyers with jobs thanks to CMHC. Banks aren't lenders anymore, as lending involves risk, and all loans are backed by CMHC so they are really just brokers that get to collect the spread.

    Higher rates or unemployment could sink this market, but the Bank of Canada meets in 2 weeks and nothing will happen. Worst case for owners is a 1.75 overnight rate this year, IMHO. Walked by Coast Capital the other day and saw a 2.05 variable rate where you can "miss a payment once a year" and "pay down your mortgage faster but withdraw the money anytime". Good god.

  11. Take a cue from VCI's readers, where up to 60% of them have left in the last 3 months.

  12. Home property taxes for many people have gone up as much as 20% to 25%. Good for the municipalities.

    There are screaming headlines all over that "Carney hinted at no rates hike this Summer/Autumn - House prices to continue to rise".

    Interesting time!

  13. You made some good points there. I looked on the web for more information about the issue
    and found most individuals will go along with your views on this site.

    Look into my web blog - Buy Viagra USA

  14. My spouse and I stumbled over here by a different
    page and thought I might as well check things out.
    I like what I see so now i'm following you. Look forward to looking over your web page again.

    Here is my web site current investment property refinance rates

  15. First off I want to say superb blog! I had a quick question which I'd like to ask if you do not mind. I was curious to find out how you center yourself and clear your mind before writing. I've had a
    hard time clearing my thoughts in getting my thoughts out.
    I truly do enjoy writing but it just seems like the first
    10 to 15 minutes are generally wasted simply just trying to figure out how to begin.
    Any suggestions or tips? Thank you!

    my webpage - vacation homes in destin florida on the beach

  16. Hey there your website url: http://www.blogger.
    com/comment.g?blogID=4251672323919283767&postID=6682953495182683277 seems to be redirecting to a completely
    different website when I click the homepage link. You
    may want to have this checked.

    My page :: vacation rental by owner hanalei kauai

  17. Hello! I'm about to start my own website and was wondering if you know where the best place to buy a blog url is? I'm
    not even sure if that's what its called? (I'm new to this) I'm referring to "". Exactly how do I go about acquiring one of these for the website I'm making?

    Look into my homepage ... panasonic electronic components distributors

  18. Thanks for some other informative ωeb ѕitе.
    Where else maу I am gettіng that
    kind of infοrmation wrіttеn in ѕuch аn
    ideal apргоаch? I hаve a
    mіssion thаt I am simply now running οn, аnԁ I have been аt the glance
    out for suсh info.

    my blog fast payday loans

  19. Нoωdу! Do уou knоw if thеy maκe any
    plugins to protесt agaіnst hackers? I'm kinda paranoid about losing everything I've workeԁ hard on.

    Any tips?

    Аlѕo viѕit my site :: quick online loans