Just over 4 months ago, I wrote that the Vancouver housing bubble had finally burst. The mainstream media has finally come on board and is supporting the idea that housing prices will fall over the next few years, based on a report from Central 1 Credit Union. Take a look at this report from Global TV:
Global TV is now saying that the “air is now officially out of the real estate balloon.” My only complaint with the piece is that there is no mention of the complete lack of affordability being any factor in the price drop. They are attributing the drop to “the global financial crisis and a big drop in consumer confidence” which have “combined to drive the housing market into recession.” Helmut Pastrick mentioned the “uncertain and volatile times we’re living in.” They say “how many times have we heard that somehow Greater Vancouver’s real market was insulated from what was happening in virtually everywhere else in the western world….that prices were falling?” They talk as if there are only two possible outcomes: either Vancouver is insulated from the rest of the world in which case our prices won’t fall along with the rest of the world, or Vancouver is not insulated in which case our housing prices will fall because prices are falling elsewhere. Even if Vancouver were completely insulated from the rest of the world (no trade, no communication, an island in the middle of the ocean) our housing prices would have to fall in order for affordability return to normal levels. Yet the piece leaves us with an overwhelming feeling that Vancouver’s real estate market woes are the fault of others, the fault of a US/world credit crisis and of a US/Canadian recession, the fault of some mysterious outside, external force. There is some mention that speculators and investors, who up until recently were lining up to pre-buy condos are likely to be the hardest hit, but no mention of their part in causing this mess. No mention of the fact that housing prices were just too damn high and affordability too damn low.
The real estate agent near the end says that we are now (or are soon to be) in a “classic move-up market.” What he is saying is that when housing prices are low, it is easier to move up from a small townhouse/condo to a house, for example. It’s funny because this is what a lot of people were doing when market prices were high; taking the equity out of their home and buying a second home or moving into a bigger house, while taking on more debt. Obviously when market prices are on the low-side it is a better time for a “move-up”, just like it is a better time to buy, or to enter the market for the first time. When market prices were high it is a better time to “down-grade”, or to leave the market entirely and become a renter.
The piece also got some of the math wrong. A drop of 12%, 13%, and 5% is an overall drop of 27.2%, not 30%:
The above is just a complicated way of saying that you had something that was reduced by 12%, then 13%, the 5%, the result would be a reduction of 27% from the original, not 30%.
Hmm, my guess is that no banks will be offering 0% down mortgages any time soon… at least not unless you have some other really expensive assets that they think they can repossess..