The "Forever" Canadian Housing Bubble

[GRG55]

Re: The "Forever" Canadian Housing Bubble

i just looked up the record of our old friend, vancouvergoinup. he joined itulip 8/2/07, and his last activity here was 12/22/10. we have been calling for a crash in vancouver real estate since BEFORE vancouvergoinup came around and was thoroughly ridiculed for his boosterism for vancouver real estate. yes, i too believe that eventually the bubble must pop, but we're winning no prizes for our ability to time anything.

and i'd like to think that vancouvergoinup is on his yacht somewhere

its utterly insane. Read an article recently about the increasingly crazy Whistler property market (two hours north of Van) and how staff can't find affordable places to live. Showcased a ski patroller who's been living in a parking lot in his 1980s vintage Dodge van for the past four years. Earns less than $3000 per month after tax income.

Who in their right mind would persist in staying in that situation year after year after year? Have people completely lost their minds?

[jk]

Re: The "Forever" Canadian Housing Bubble

Who in their right mind would persist in staying in that situation year after year after year? Have people completely lost their minds?

some people REALLY like skiing.

[GRG55]

Re: The "Forever" Canadian Housing Bubble

some people REALLY like skiing.

they certainly must.

There's something else going on here that I do not understand.

I live within 90 minutes drive of four world class ski hills including Lake Louise, which annually hosts a World Cup downhill event. The vacancy rates are currently high, rents are affordable, and housing prices are actually slowly falling at the moment. And we had a spectacular winter for snow this year, at a time many resorts further south in Colorado and a Utah were struggling.

If he makes his living from being a ski patroller he does not have to live in a clapped-out 40 year old van in a parking lot in Whistler. There's something else going on here I do not understand. And not understanding is the reason I have for years steadfastly believed Vancouver and surroundings have insanely priced property markets, (over)due for correction.

[jk]

Re: The "Forever" Canadian Housing Bubble

they certainly must.

There's something else going on here that I do not understand.

I live within 90 minutes drive of four world class ski hills including Lake Louise, which annually hosts a World Cup downhill event. The vacancy rates are currently high, rents are affordable, and housing prices are actually slowly falling at the moment. And we had a spectacular winter for snow this year, at a time many resorts further south in Colorado and a Utah were struggling.

If he makes his living from being a ski patroller he does not have to live in a clapped-out 40 year old van in a parking lot in Whistler. There's something else going on here I do not understand. And not understanding is the reason I have for years steadfastly believed Vancouver and surroundings have insanely priced property markets, (over)due for correction.

how's the nightlife, restaurant and bar scene around whistler vs the areas near you? man does not live by snow alone.

[Adeptus]

Re: The "Forever" Canadian Housing Bubble

how's the nightlife, restaurant and bar scene around whistler vs the areas near you? man does not live by snow alone.

I must admit, the view from the top of the two mountains is nothing short of breath taking. On a clear day, most beautiful views I've seen in my life. You can see snowy mountain tops as far as the eye can see. Skiing down the mountain is also very beautiful. The skiing is overall world class. There's over 8,000 acres of skiiable terrain - making it the largest skiing destination in North America . At the bottom of the mountain there is what is called "Whistler village", which is a mix of restaurants, bars, hotels and some shopping. It's great, but you'd exhaust all there is to see and do there after about a week.

Outside of the main Whistler mountain area there are more hotels and more restaurants, but also some additional activities. Whistler is actually a tourist destination all year round because of all the activities. That said, after 2 weeks, I'd be bored of the activities aside from skiing.. but I'm not at all into drinking and bars, so maybe others would dig the scene more than I. For me the outdoors and a few 4 & 5 star restaurants are what attract me. But as you can imagine, it's pretty darn expensive - but I'm definitely going back again. Been there 2 times in winter and 2 times in summer (business trips). Very different experiences, but for sure go in Winter if you only go once.

[GRG55]

Re: The "Forever" Canadian Housing Bubble

I used to ski Whistler when I was an engineering student at UBC in the 1970s. That was before it was "discovered" and long before Blackcomb was developed.
Back in those days Toni Sailer used to run an annual summer ski camp on the glacier.

Couldn't count the number of days it was pissing down rain in Vancouver and in the Whistler village, and the gondola would take us up through the stratus and we would ski the powder in the sunshine above the cloud deck all day. One of the small, original gondola cars is pinned to the current lower station in the village. It looks so tiny compared to the high capacity system in place to move the high-net-worth hordes today.

[thriftyandboringinohio]

Re: The "Forever" Canadian Housing Bubble

...the high-net-worth hordes...

That's a great turn of phrase, I will be using it from now on. "High-net-worth hordes"

[jk]

Re: The "Forever" Canadian Housing Bubble

[touchring]

Re: The "Forever" Canadian Housing Bubble

I read that the sydney market is already melting down.

[GRG55]

Re: The "Forever" Canadian Housing Bubble

The most delusional property market in the world marches on, apparently. If this picture doesn't represent how utterly ridiculous things have become in Vancouver, I don't know what else can.

However, the banks are becoming cautious and some new Federal lending standards that kicked in at the beginning of this year are starting to bite. July sales volume down 24% compared to a year ago across the Province of B.C. Condos have been the hottest market, as that is what most can afford since single family detached homes are in the stratosphere. Of course all that has done is push up the average cost of condominiums and narrow the gap with SFD prices.

[touchring]

Re: The "Forever" Canadian Housing Bubble

The most delusional property market in the world marches on, apparently. If this picture doesn't represent how utterly ridiculous things have become in Vancouver, I don't know what else can.

However, the banks are becoming cautious and some new Federal lending standards that kicked in at the beginning of this year are starting to bite. July sales volume down 24% compared to a year ago across the Province of B.C. Condos have been the hottest market, as that is what most can afford since single family detached homes are in the stratosphere. Of course all that has done is push up the average cost of condominiums and narrow the gap with SFD prices.

Xi is becoming another Putin, going after businessmen arbitrarily, no one is now safe, expect more political refugees to Vancover.

NZ has closed the borders - https://www.theguardian.com/world/20...foreign-buyers

Even Malaysia is banning sales of property to the Chinese - https://www.scmp.com/news/asia/south...ty-residential

Can you imagine that? Malaysia. Not the best place to live in, but is the only option affordable to the middle class Chinese families that can't afford Vancouver or Melbourne.

[jk]

Re: The "Forever" Canadian Housing Bubble

Vancouver existing home sales fell -36.6% Y/Y in August. That's -25% below the 10-year August sales average. Moreover, the total number of homes currently listed for sale rose +34.2% Y/Y.

https://app.hedgeye.com/insights/700...lem?type=macro

[dcarrigg]

Re: The "Forever" Canadian Housing Bubble

Vancouver existing home sales fell -36.6% Y/Y in August. That's -25% below the 10-year August sales average. Moreover, the total number of homes currently listed for sale rose +34.2% Y/Y.

https://app.hedgeye.com/insights/700...lem?type=macro

For whatever an anecdote's worth, I met a couple kids just graduating college up here who were offered jobs in the Bay Area for bigger money and refused because they didn't want to deal with outrageous prices, and so became roommates and picked up jobs paying substantially less locally. And this area's not cheap. It's the first direct instance I heard of big tech actually losing talent because they refuse to expand out of their little bubble. The clustering effects were good, for a while. Anyone who got in and got a piece of property got to catch the ride up. But I have a feeling if the air ever gets let out of this thing, it could be a long time where reputation keeps people from considering moving to these places that everyone stereotypes as super-expensive. Just like Harlem hasn't been majority black in 20 years, and South Boston probably has more gluten-free Harvard grads than Will Huntings, the reputation a place gets can long outlive reality.

When kids at the top of their class in top 5 ranked universities say, "I'd never work at Facebook, I don't even want to move to the Bay Area" that's a problem. There maybe a generation coming up for whom places like Menlo Park and Mountain View are more or less synonymous with places like Wall Street and Greenwich Connecticut. Bougie; culture-less; not cool. Not sure how much of this translates to Vancouver. But reputation matters. If the first thing a 20 year old kid hears/thinks about a place is it's full of rich douchebags and boring old business assholes, it's not going to be a place they want to move. The "young West-Coast entrepreneurs" are looking a bit long in the tooth these days. Sure, they paper over it with botox and hair plugs, but kids can tell. San Francisco rode the 1967 summer of love thing a long ways. That image is pretty much dead now. Earth tones have long since been replaced with sterile blacks and whites and cold greys.

It feels more and more like a big shift is coming. Not just with housing prices. With preferences generally. Urbanism, economics, politics, culture, the whole lot of it in North America feels distinctly "stuck" and desperately holding on. News stories routinely use the word "young" to describe people in their 40s and 50s. Another anecdote--neighbor's kid just went off to college. Brilliant, great grades, great athlete, all around top-notch kid. Got into some top US universities. Eschewed them all for a foreign university. The second best one in its nation, so no slouch, but without the reputation of some of the American ones. The reason? Cost. Smart kid, so whipped up a spreadsheet and did the math. Student health insurance and health fees alone at the US school cost about as much per year as room and board at the foreign school, whose nation provides healthcare to students. Tuition was about 1,000% higher at the US school. Even the parking fee would have come out to $2,500 or so over the course of a degree. Free at the foreign school. Facilities were older, less luxurious. But the after tax total cost was only about 15% of the US school, for a place that offers a comparable education. So why the hell pay six or seven times more?

I was impressed to see a 17/18 year old thinking like this. But then I was at a graduation party and more were talking about it. In fact, all the kids were talking about their friends who chose foreign universities, and the kids younger than them were excited about the idea too. All of them worried about cost. All of them talked about having older cousins or siblings in their 30s who still can't afford a house, and how they don't want to live where that will happen to them. They seem to be increasingly likely to know people abroad, make friends with people abroad online, and consider leaving the US. The Chinese-American couple up the road is encouraging their kids to move back east for opportunity. The US is still the safest bet in the world for investors and wealthy people. But it's not so great for working or middle class people. And the smart ones with ability will figure that out and simply find ways to arbitrage the costs of living in the US by getting out of dodge, the same way wealthy people avoid taxes by using tax havens. I mean, hell, look at the uninsured prices for hospital care just 5 or so hours' drive north of here. That's a joke. Maybe 15% or 20% of US costs, not accounting for the CAD-USD conversion, which makes it 30% cheaper still. Imagine a $240 Canadian ambulance ride?! Or imagine a $2,800 Canadian night in the hospital? What is it here? $10,000 or so US per night, right? Imagine paying $20 CAD for a cast. They'll pork you for $7,200 USD just over the border. If you don't have any health insurance and you have any sort of injury/illness that can wait a couple hours' drive, you're guaranteed to be better off moving into a hotel and paying the uninsured fees up there. Anything but staying in the US of A.

I think the kids are picking up on that. College is the same way. Prices here are just so ludicrous that it's worth going to where they're not. And housing is similar, only not localized to the USA. You can buy a house for the price of a VCR in Cleveland (where you can watch the best NBA player maybe of all time for $5 a ticket), and not too much more in Trois Rivieres (which may have the lowest crime rate in the world), but you can't sleep rough in a tool shed for less than median family income in San Francisco and Vancouver. And what do you get for the pleasure? A city whose prices have driven out all reasonably priced culture, entertainment, and unique commerce--the weird and strange and interesting places--the really good things about capitalism. Instead you get restaurants serving black sea caviar and quail eggs and a whole bunch of boring chain luxury shops and everything closes early. The entire city's commercial district ends up looking like Foxwoods, because the city has basically become a speculative casino and that crap is all that survives in a place like that. And it feels just as plastic and fake. You been down to the new Seaport District in Boston, jk? Anywheresville. Maybe as well be San Jose. Or Singapore. Or Austin. Or Vancouver. Who cares? No culture. No character. LEED-certified platinum glass and steel buildings filled with coffee shops with fake brick walls and fake copper ceilings and fake wood framing pretending to be from an old city like...Boston...except...they're in...Boston. If it all burnt to the ground tomorrow, it'd probably be doing the city a favor.

Long story short, don't be surprised if the future holds more suburbanization than urbanization, an upcoming generation that eschews and avoids cities with a reputation for high prices like the plague (even if they move into smaller, neighboring places), and a prolonged period of bag holding, since prices tend to be sticky on the downside. Because talent is going elsewhere. The only question is whether and to what extent capital will move to meet it or stubbornly insist on staying put.

[jk]

Re: The "Forever" Canadian Housing Bubble

just a minor point- you're comparing a $30k 3 night hospital stay in the u.s., which presumably includes the physician fees, mri's, cat scans, meds, pulmonary therapy, etc, to an unbundled price list for the hospital bed alone. in general of course you're right.

re universities- the only down side i can see to a foreign university is having a smaller network of u.s. friends/contacts assuming the student eventually will live in the u.s.

[dcarrigg]

Re: The "Forever" Canadian Housing Bubble

just a minor point- you're comparing a $30k 3 night hospital stay in the u.s., which presumably includes the physician fees, mri's, cat scans, meds, pulmonary therapy, etc, to an unbundled price list for the hospital bed alone. in general of course you're right.

re universities- the only down side i can see to a foreign university is having a smaller network of u.s. friends/contacts assuming the student eventually will live in the u.s.

You're not wrong. I'm sure there are more downsides. Plane tickets. Visa fees. Immigration troubles. It's not gonna be a cakewalk. The point is the brain drain. Only something like 35,000 American kids left the country for college in 2011-2012. More than 10 times that came to the US. That number has been dropping by 7% per year, while the number of Americans leaving has been increasing by more than 11% annually. If the trends continue, we're looking at the US becoming a net exporter of students somewhere in the 2030s. And I think it's largely past reputation holding things together as it is. Housing is worse yet. As the echo boom ages out of child-rearing age, the American Dream will leave them behind forever. I don't pretend to know the politics of resentment that will create, but I bet it will be nasty. Meanwhile, from what I can gather, Gen Z looks at them as a failed group they're desperate not to emulate. The new urbanism and techno-centricity predicted off millennial trends may prove to be nothing more than a temporary and desperate recessionary reaction born of hopelessness and lack of opportunity than genuine long-term trends and desires. And if that's the case, there's a whole lot of re-thinking that needs to happen about what the cities and markets of the future will look like. How many might have preferred cable, but only could afford Netflix? How many preferred to live in a house, but only could afford to share an apartment? How many preferred to live in the burbs, but only could find work in a major metro? How many want to have kids but can't afford housing? How many regret student loan debts?

The running assumption is that markets are about choice, but they never were even theoretically supposed to be that. They were supposed to be a way to allocate scarce resources; to force those who cannot pay to go without and reward those who can with endless bounty: a price-setting mechanism. If you stop to think for a second that they don't reflect choice, then trends--especially during and following major recessions--might be more reflective of decisions made under duress than decisions reflecting the true desires of people. And to the extent that's the case, a bunch of bad assumptions about what the future will/should look like are going to be made. Now, imagine it's your job to make long or even medium term speculative investments in real estate. Well, if you buy into the new urbanist mantra, Vancouver seems like a sure bet. Buy that busted down rubble pile that used to be a ranch for seven figures. Nobody will live in Saskatchewan in 20 years. But if it's all base on a false premise, then whoops! Ditto with the tech industry. Amazon was cool 8 or 10 years ago. So was Google. So was Facebook. So was Uber. So was Tesla. But if this were 1998, you could say the same thing about DeLorean. And Merry-Go-Round. And Atari. Even if you had dumped money in the market back then, you would have made more off buying M&T Bank than Apple. The popular narrative is skewed, not just with survivorship bias, but with tech bias. It's all very easy to walk away from, or for kids never to get involved with in the first place. They're making it harder, as my recent effort to de-Google-ify taught me. But it's certainly easier than changing home fuel sources.

The indispensable trillion-dollar companies of the now feel more dispensable than ever. And the groupthink feels as bad as ever. They say the gig economy is the future. But the stats say otherwise. They say dense urban cores are the future. But the stats say otherwise. They say smartphones and apps are the future. But the stats say otherwise. They say Facebook is the future. But the stats say otherwise. They say Netflix is the future. But the stats say otherwise. They say car ownership is passé. But the stats say otherwise. I seem to be the truly rare contrarian in even bringing this up to begin with, never mind in seeing it all as connected. But the really cool, exciting stuff is not going to happen on an app. It's not going to happen in self-driving cars. It's not going to happen in the gig economy. It's not even going to happen in Silicon Valley. That was the last chapter. I, for one, am actually really hopeful that the next one will be better. But it's not going to be easy, and it's going to be a fight. Yesterday's upstart garage innovators are today's entrenched monopolies. The only solace I take from history is that Americans, even without thinking about it, tend to be pretty good at finding a way around. And here's the real kicker: They're already doing it.