Interesting Article on the Rich

Having their net worth trashed in this recession. McAfee anti-viral founder blew through $100 Million in bad RE investments. I will post a link at the bottom.

But here's what got me..he sold his waterfront stunning Hawaii estate at auction and only got $1.5 Million for it. It is stupendously beautiful. The sort of place I could happily go and live until I draw my last breath.

http://www.auctioncompanyofamerica.com/pdf/217_G-870web.pdf

What would you get in Vancouver for $1.5 Million??

Anyone want to post some choice comparisons to show just HOW over-priced Vancouver is.

Here is the article:

http://finance.yahoo.com/banking-budgeting/article/107575/rise-of-the-super-rich-hits-a-sobering-wall.html

I'm back

A few things from my trip. There are large parts of this Province that are still in a real estate doldrums. They are areas which actually make things, or dig them out of the ground and are feeling the pinch of the economic slump. Places like Campbell River which just lost it's Mill.

Meanwhile in Victoria, everyone seems to be wondering how much further the Provincial Government will have to cut to make up for the drop off in revenue. I suspect soon the Federal Government will also start worrying about the deficit, and put on hold further plans to spend our way to prosperity.

The banks are making good profits, especially The Royal, though they have all increased their future loan loss provisions, which is prudent considering 60% more Canadians have fallen behind on their mortgages compared with a year ago.

These two facts just don't add up. Home prices are up to new highs in many parts of the country, and yet 60% more people have fallen behind on their mortgages.

That's what happens when a financial crisis hits our biggest trading partner, drags our interest rates down while we are still robust and then the crisis seeps across the border later. It means our assets get that final push of adrenaline from the low interest rates, until the reality of the economic slump brings them back down to reality.

BTW- the banks are making money from the yield curve. What could better than paying people almost nothing on their GICs or deposit accounts and lending it out at 4%-8%. Those are near the highest margins in history. I remember when banks would pay 5- 6% on deposits and lend it out to consumers at 8-10%.

They are netting 2-3% more now and can leverage that up.

BTW the TD CEO just sold $24 Million in stock options (13% of his holdings).

Sorry folks nothing to say and I am heading off on Holiday

Enjoy the next week and lets see what late summer and fall bring for us bears. So far I feel like we have been caught in a bear trap and the jaws are getting tighter.

Do we bite the bullet cut the leg (and an arm) off and jump in or do we wait and hope sanity returns.

Up-date

There is no sign of a slow-down in our housing market so far. Maybe it is the last rush to buy before school starts. However the numbers are far from bearish, with 100% sales/list or higher the last few days in many areas.

To look at Vancouver RE you would think the world was in the midst of a rip-roaring boom not a near depression.

If I had to guesstimate it, I would say prices are flat but clearly not dropping with this level of activity.

The right shoulder mentioned in the chart below may take some time to play out, but if we see prices move up higher, then the comparison with the bubble graph, or a head and shoulders top will lose validity.

Anonymous said...
What 'event' would cause the second part of that graph to play out?

It seems inconceivable that we are just on the edge of another major drop, but anything is possible

There are many things. Putting aside the black swan events which of course cannot be predicted, there are some likely suspects out there:

1) A slow down in China. We have increasing correllation with the Chinese economy (HK, China, Taiwan and you can add Korea). Not only do we have significant numbers off-shore buyers from these countries but their demand also detemines the price for many of our commodities.

China's rebound has been quick and impressive. It took a huge infusion of stimulus and orders from the government to the banks to lend or else..but it worked to stop the Free-fall and produce some domestic demand which will have to tide China over until the rest of the world recovers. However their recovery and need for commodities is still very fragile and I could see a weakening in demand later this year or early next.

China is truly an economic miracle, but the juiciest rewards may have been restricted to those with the best contacts. The fruit doesn't fall too far from the tree according to this report:

http://tinyurl.com/njcpn7

Any renewed weakness will not be well received by the rank-and-file, and could cause some social problems.

2) Interest rates. We have seen interest tick up slowly from the lows a few months ago. If we start to show some economic strength, ironically the rates will move higher and start to impede that very growth. Am I predicting that..no. It is just something to watch.

3) The Swine flu bears watching. Hopefully it will not make a big come back and restrict travel, spending etc and add to deflationary pressures.

4) A double dip recession. We are seeing some stabilisation in the US and elsewhere. However this is happening from a very low base. Unemployment sits at 9.7%, a rate that is almost unheard of in the US. If you add in the number of workers who are employed, but working on reduced hours, it would push the rate up a few more %.

Were we NOT to stabilise here, we would be looking at a full scale depression.

I think the recovery will be tepid at best and then there is a very good chance that we stagnate or start to sink again. However I do not have a good feel for the time-line, whether it would be in the next year or even longer that this happens.

I am sure you guys can think of lots more reasons too. Lets see if this pressure cooker buying keeps going or we settle to a more balanced market (and dare I say even a bear market again) once fall comes.

Ok bears make or break time...

I have posted the graph of price bubbles I often refer to on this blog. Below that is the REBGV Average price graph.

The similarity in the shapes of these two charts is clearly obvious.

At each of the turning points, human nature being what it is, there is almost complete despair and capitulation by bears and bulls.

Last fall it was the bulls who were shell-shocked as 'nothing sold' and MOI reached 20+. Now we have bears in utter disbelief as sales have exploded and MOI is down to 3 months.

So now what?

Well if we are still on the bubble implosion script, then we can have prices hang around here for longer or start to drop, but NOT go up much more. Any significant rise which threatens to match or beat the recent bubble highs would make me seriously reconsider the bubble-bursting scenario.

This is it bears...

Being Fair to Realtors

OK I know that is a bit of an odd title for a RE bear. However I do have a lot of friends who sell real estate and one thing I have seen over the years is how unfair it can be for those representing the buyers, in a hot and a cold market.

Let me explain. Lets say you have a prospective buyer in a sellers market. You take your buyer around, send them info, give them advice and then get repeatedly out-bid and have to start all over again.

In a dropping market, things are even worse. Buyers want to see everything out there, they often get cold feet and pull offers or put impossible conditions with multiple 'escape' clauses in.

Then one day you find out your buyer went to an open house and cut a deal with the listing agent who was 'double-ending it' and poof, your client and the many hours you spent working with them disappears.

What I heard some Realtors doing is charging a $500 fee to at least cover their gas money. If the buyer completes the transaction through that realtor, they refund the money. However if they don't or change Realtors then they forfiet the money.

What do you folks think about that? Would you be willing to pay $500 to get better service.

I think it is a good idea. It removes the time wasters. In truth the listing realtor often does less work than the one representing the buyer. I see some Realtors with dozens of listings. There is no way they can be marketing each one. They market themselves and then listings come to them since they are known as the high priced condo realtor... or the waterfront realtor.

The Realtors with the buyers then have to show up and sell their inventory for them.

Is Vancouver becoming unlive-able??

We have always been at the top of the most live-able cities in the world. The reasons are obvious.

However today I had a long chat with some long-term residents who believe we have moved towards a city that is becoming undone due to it's own success. Too crowded and too developed.

Lets look at this week-end. We have the Firemen and Police Games, Gay Pride Week-end, the Fireworks, Cruise ships and the usual mass of tourists plus a new arrival of Far-East home students which are subsiding many lower mainland mortgages.

The result is gridlock. It is hard to get into Stanley park, or cycle or walk around it. Driving to the supermarket is a mini expedition.

As if it wasn't bad enough having our week-days clogged with construction and filming, the week-ends have to be messed up to.

I know we should be grateful that all these activities (from tourism to filming to constant construction) bring the large number of jobs with them. Some of these jobs are even enough to pay for a reasonable life, if you didn't have to pay for housing.

It makes one wonder whether there is anyone at the helm of this, planning how our lives are being changed by the develop-at-any-cost mantra.

Where are the new down-town residents going to drive their cars, does it matter that our air quality is going down. What was the point of the Olympics? To get us on the map? Or to inconvenience locals, enrich developers and go into debt?

This week-end it was unbearably crowded everywhere I went, from Down-town to the beaches to the Grouse Grind. I am beginning to believe we do not have the land mass, or the infrastructure to become the huge world class city our Premier and the developers are trying to squeeze us into.

Are we the victims of our own success?

I am seriously starting to consider a move outside the lower mainland.

Meanwhile Larry Yatter is the first one out with the July numbers:

http://www.yattermatters.com/real-estate/vancouver-residential-average-july-09/

Lets pay particular attention to the first graph on his post and compare it to this one:

http://tinyurl.com/ntvgvj