Dude, where’s my home equity?

Photo by Duncan Rawlinson / The Last Minute Blog

“A continuing imbalance between supply and demand will put some additional downward pressure on home prices in 2009.” –B.C. Real Estate Association, Housing Forecast, February 2009

Blame it on the recession.  Blame it on high prices.  Blame it on Liam Neeson being a total badass.  The thing is, it doesn’t matter who you blame because at least we’re on the same page.  According to the B.C. Real Estate Association, real estate prices will continue to fall in 2009.  Experts and renters unite?!

The BCREA forecasts a 13 per cent price dip across the province.  In Greater Vancouver, the projected dive is 14 per cent.  While this may seem modest, even optimistic, give the pumpers points for making it to the party.  Their forecast report refers to the collapse as “some additional downward pressure.”  You have to laugh at the language.  Downward pressure?  What is this, a back massage?

Here’s the spin-free version: The BCREA expects the average home value in Greater Vancouver to decrease $7,147 a month, every month, in 2009.

Photo credit: Duncan Rawlinson

51 Responses to “Dude, where’s my home equity?”

  1. chuff Says:

    The BCREA is calling for a 13% dip. Is it safe to assume that the 13% figure is conservative or somewhat conservative b/c of the source?

  2. The Pope Says:

    You beat me to it. I tip my giant pointy hat to you sir.

  3. paulb Says:

    “Blame it on Liam Neeson being a total badass” LMAO!! You must have been laughing as you typed that.

    Perhaps they are afraid of ending up like David Lereah…raked over the coals.

  4. HHV Says:

    I believe the BCREA margin of prediction error to be somewhere around 50%. So, I suspect they won’t even be close to the mark.

  5. condohype Says:

    Love the new Liam Neeson movie. It’s so bad it’s awesome. Best guilty pleasure of the year.

  6. Where will your money go? | Vancouver Condo Info Says:

    […] The BC Real Estate Association has released a revised forecast predicting that house prices in Metro Vancouver will drop 14% in 2009.  Condohype beat me to the punch on the basic math: Here’s the spin-free version: The BCREA expects the average home value in Greater Vancouver to dec… […]

  7. The Urban Dweller Says:

    LOL at Liam Neeson!! Yeah 13% is a good consensus number. I was thinking more like 13.46435%.

  8. Duncan Says:

    Thank you for using my photo! 🙂

  9. Larry Says:

    Seems the prediction gets more dire everyday. I remember seeing a prediction just last fall that housing prices will lose 10 percent or so until end of 2009. Then, because of the Olympic effect, the prices will pick up because the world will see how great a place Vancouver is.

    I’m an optimist and Vancouver is really a wonderful place but predicting a pickup just because of the positive media is a bit of a stretch. On the other end, cheering the demise and loss that people, however naive they may have been, is no consolation. Someone lives in the foreclosed (?) home in your photo. They may have children and have lost their job. Cheering the end of the irrational exuberance is wonderful and cathartic. But you have to think about the human faces who have lost a lot. It may be only their home today but it may be their families tomorrow.

    I’ve lost quite a bit of equity in my condo but that doesn’t even compare to the pain of the guy’s surviving family members. So how about some levity in the all gloating, eh?

  10. Larry Yatkowsky Says:

    LOL!! with tongue in cheek.

    Yah gotta love it when none RE types publish BCREA news faster than RE types and are fighting over who is first – takes me back to multiple offers.

    Suspect is that “some” RE types are out there selling houses. A new low!

    hYpSter: since you are johnny on the spot how are you on earthquakes? 🙂

  11. Westlake Says:

    @Larry (from above, not Yatkowsky): Condohype chose the photo because it’s a Vancouver Special not because it’s in foreclosure. Who said it was a foreclosure? The sooner prices return to normal the better. The market cuts both ways. Rising prices have hurt many families too.

  12. patriotz Says:

    Larry @ 11:52, you’re talking as though the housing bust was caused by some external event like a meteor impact or earthquake.

    The cause of the housing bust is that prices were too high, and the reason that prices were too high is that people were willing to pay excessive prices. The people who bought houses at excessive prices are themselves responsible for the bust.

  13. buff_butler Says:

    @Larry

    Who said condohype was laughing at destitute families???

    Just for fun to turn your agument arround on you what about families that could never afford housing? Or that your kids will have to go into lifetime debt if the prices dont come down? Regardless of market direction some people gain and some loose.

  14. Safety Sam Says:

    How do I get a copy of the seismic building requirements for condos, and are there any specific west coast requirements tieing in the building skin to prevent leaky condos, is there a company who can advice on these matters.

  15. The Urban Dweller Says:

    All fear the wrath of mother market. She will take your savings and equity and blow it all on crack.

    Note: The crack comes from the DTES so the money remain in Vancouver!

  16. paulb Says:

    I just spoke at length with a hedge fund manager who expects 70-80% decline. That’s the most bearish opinion I have heard yet. I would expect 20-25% this year.

  17. anon Says:

    “Some additional downward pressure”… is that like when a comet hits the planet?

  18. jesse Says:

    Larry: yours is a woeful paean of foreclosed families with too much debt. Yet I hear no talk about sympathising with those who never saddled too much debt in the first place and chose to rent.

    Maybe the children of the foreclosed families need to see their parents tarred and feathered so that history doesn’t repeat itself.

  19. VHB Says:

    Re Jesse: Yeah, it’s like the debt just kinda mysteriously appeared. Whocoodanode that building up a huge leveraged financial position in a single asset was a bad financial move?

  20. Carioca Canuck Says:

    “Dude, where’s my equity”……

    Very describe indeed.

  21. betamax Says:

    “Larry: I’m an optimist….Someone lives in the foreclosed (?) home in your photo.”

    Yes, you’re quite the optimist.

  22. dg Says:

    Larry
    I don’t get that vibe off of CondoHype. If you want to see what you have described head over to Garth Turners Greater Fool Blog. Now there is a site that caters to people that hope for real estate armagedon.
    This site is great for accurate info on the ins and outs of the condo marketing machine. Vancouver has been subjected to it for years. I can’t remember which bridge(I think it’s Burrard) but I remember walking across it and there is/was a sign on the right going into Vancouver. It stated: “Limited Vision”

  23. Nero Says:

    Hey PaulB. Being in the industry, I can definitely say that not all hedge fund managers are bright, they are just very confident in their predictions!

    Perhaps some condos will go for 70-80% below peak, but I really doubt the detached benchmark will fall farther than 50%. The baseline prices (before the peak) usually signal the worst. That said, anything is possible….

    I think we’re going to see a 25-30% drop this year too.

  24. dingus Says:

    To pile on Larry:

    Where was all the handwringing on the way up? All we heard on the way up was cheering. No one — NO ONE gave a rat’s @ss about the adverse impact of high property prices.

    What of the families that couldn’t afford to get in, that have spent years wondering if they were indeed priced out forever? What of those folks that made the hard decision to rent, pondered having to move (or indeed did move) away from their jobs, friends and families because of the bubble, all the while being mocked for being “bitter jealous renters”? Can you not see that this is intense relief to those people who have been sucking it up and making those kinds of sacrifices? Now we’re supposed to feel bad for those who didn’t? Spare me the crocodile tears. Seriously.

  25. dingus Says:

    Book it Danno. We have 11% declines yoy. And the lowest sales since… the collapse of the 80’s.

    http://www.vancouversun.com/Metro+Vancouver+home+sales+lowest+point+since+early+1980s/1249139/story.html

    So an 11% decline, even factoring in gains from Jan to May. So we’re what, over 15% off peak in the space of 8 months? Bring on the rest of ’09, I say. Even with BCREA’s likely conservative 14% prediction, that’s at least a 25% decline in 18 months.

  26. Tom Says:

    I can’t imagine the people who paid inflated prices for these crap-boxes.
    I owned a condo (built in 97) and was mortified to see how poorly it was built. These things aren’t meant to last even 10 yrs!
    Oh, it’s going to get much worse … price declines AND huge repair bills.

  27. yoword Says:

    dont worry, there will be a 95% decline, and we can all buy our dream house for 5 dollars.

  28. dingus Says:

    Heck, I’d take a hundred dollar house even before the 95% decline.

  29. greg Says:

    Forget about Vancouver special, that photo credit is “Vancouver Ugly”.

  30. Boombust Says:

    Does anyone ever stand on those balconies? Have a chat? A drink, perhaps?

  31. Disbelief Says:

    http://www.househunting.ca/buying-homes/story.html?id=5e7797f2-5682-46ef-9bf8-6fd0a6ce7896

    This makes for an interesting read… I guess they have to pay the bills somehow. And we wonder why there are still morons buying. Well the interest rates are low now so jump back in and buy. As any stupid specuvestor knows its all about the monthly payment….. For now anyway.

  32. patriotz Says:

    That article is utterly unreal. At first I thought it had to be a couple of years old, but I did a google and no, it’s from the Calgary Herald on January 31, 2009. That would be the same Calgary where the Canadian RE bust began in July, 2007.

    OK people, it’s time to shake your-selves out of that funk you’re in. What has happened to the housing industry in the United States will stay in the United States, for the most part.

    Global economic crisis? What crisis? Subprime is contained! Oil and commodity bust? Now where did you get that idea? You just get yourselves out and buy a house right now, because they’re not making any more land in Calgary, you know.

  33. foo Says:

    Now it’s time for the post, “Dude, where’s my tax revenue?”

  34. Maurice Troy Lamont Says:

    What you people fail to understand is that if the average price decline is 7k, and the average house is worth 700,000, then all the houses that are worth twice as much, say $1.4 million in West Van — will lose HALF as much.

    My partner works for the GVREB and he ASSURES me that the board’s forecasts all err on the side of the worst case scenario, meaning if they SAY 13% decline, they really mean it’ll go down only about 6%. So they are just covering their tushies in case it goes down farther.

    And I absolutely LOVE my deck up here in West Van. I could not possibly put a price tag on my tanning opportunities — see and be seen, kiddies! — and the view. My partner tells me too that there are “pockets of strong resistance” to price drops and that some areas will see significant INCREASES in 2009.

    So all you doom and gloomers will lose out by selling out now. Ride the tide, kiddies, ride the tide. Good things are on the horizon, and a new wave of buoyancy is fast approaching the Vancouver housing market. Mark my words, lickety split!!

  35. dingus Says:

    Boombust:

    Two words:

    Candy scramble.

  36. dg Says:

    Troy
    Keep baking that brain on your West Van deck, it has done wonders for your ability to add, divide, multiply and subtract.

  37. jesse Says:

    “What you people fail to understand is that if the average price decline is 7k”

    Your comment is funny when I say it out loud in my best Thurston Howell the Thuuurrd voice. Thanks for spending time with the proletariat, Mo Troll Lamo.

  38. oneangryslav Says:

    Troy, are you for real? Sometimes it’s hard to tell snark from sincerity. Let me try to make you understand where you went wrong.

    First, the 7k/monthly decline is based on the 14% drop predicted by Cameron Muir for Greater Vancouver between Jan 1/2009 and Dec 31/2009. This would take the average price of a Greater Vancouver home from $593,767 to $508,000. So, subtracting and dividing by 12, we get an average monthly drop for the average Greater Vancouver home of exactly $7,147.25.

    Now, let’s assume that there are only two different types of properties in Greater Vancouver–houses that sell for $600,000 and houses that sell for $1.4 million. Let’s further assume that they lose value at the same rate, so that over twelve months each type of house will have lost 14% of its value. So, the cheaper house will be losing value at the rate of (600000-(600000*0.86))/12=$7000 a month.

    The $1.4 million house will be decreasing in value by (1400000-(1400000*0.86))/12=$16333.33/month.

    Here’s an added bonus for you, MTL:

    Answer true or false: assuming hell freezes over and Cameron Muir is correct that a 14% drop in prices will occur in 2009 and assuming in addition that pigs start flying and real estate prices begin to recover in 2010, would a 14% increase in value from Jan 1/2010 to Dec 31/2010 bring prices back up to where they began on Jan 1/2009?

  39. John Says:

    So if you were naive/foolish/greedy enough to buy into the hype because you just HAD to own your own place(s), let’s see what you could have bought (on top of the place you’re living in right now) at $7,147 a month for a year. For about 70,000 you could have got your current house and:

    1. A great education – an MBA or retrain as something to protect yourself against upcoming job cuts (much more valuable in the long term than RE)
    2. A multi-year round the world trip
    3. A half decent sports car
    4. Several grand in interest for just banking it and a significant nest egg for the bad times (i.e. very soon)
    5. Hundreds of tiny dogs, complete with carrying bags
    6. 10 houses in the USA (and who knows maybe a whole house in Canada before long)
    7. A few hundred gold coins
    8. A $3.50 Starbucks coffee every day for the next 54 years

    But, of course, it’s much better to own a place as soon as you can, no matter the cost and even if you buy at the peak. Makes MUCH more financial sense than renting and waiting…

  40. alexcanuck Says:

    Troy:
    Can I have some of what you’re smoking? Because (weekends only) I’d love to lose my ability to do simple math and think logically. Would be nice to live in such a simple little world.

  41. dingus Says:

    Isn’t it kinda telling (in a sad way) you can’t tell a true bull from a spoof?

    Get ready for the next leg up, nutslaps! I’m invested in downtown condos and SUVs!

  42. anon Says:

    Folks, here it is. 50% to start by the beginning of next year. As the Depression really hits and the media quits ignoring it, it will max out at 60-75% off the last peak.

    95% is a straw man.

  43. george Says:

    Troy is trying very hard not going into clinical depression by thinking of all the money she is going to loose and has lost on her west Van pad.
    Us doctors call this cognitive therapy or Positive thinking. 🙂
    Reality is Troy you bought at the wrong time !

  44. blueskies Says:

    Us doctors call this cognitive therapy or Positive thinking.

    to counter the “cognitive dissonance”
    emanating from the various REIC orifices….

  45. chamberlaingroup Says:

    In Calgary CREB is calling for a 2% decline in Single family homes and a 5% decline in Condos…

  46. dg Says:

    Anon
    “Depression………the media quits ignoring it”?
    That’s all you read in the media these days. It is tough finding a positive story. If this is ignoring it, what do you define as giving it attention.
    Have you noticed that the homes sections in the newspapers has shrunk or disappeared and the careers/education section has begun to take off. I would hardly say anyone is ignoring it. As for your price decline predictions they are verging on ridiculous. Buying now is ridiculous but waiting for your predictions to come to fruition……….well let’s just say when cows fly.
    Markets have their tops and bottoms. Just like bikinis.

  47. Disbelief Says:

    I guess there is something to be said to looking on the bright side of things once you have made a decision. Ignorance is bliss I spose… But do you think for one minute that Vancouver is a magical place that can only go up when everything real (wages, commision based on lack of sales) stays the same or goes down. In hindsight ignorance is just plain dumb. Think about that you nutslaps (whatever that is).

  48. Dauphin Says:

    @George: I believe “Maurice Troy” is a HE not a “she”. Or maybe somewhere in between the two 😉

  49. milo Says:

    Beautiful sunset this evening.
    http://www3.telus.net/earthone/webcam.html

  50. yoword Says:

    NO NO NO! don’t you guys know there is going to be a 99.9 % decrease, next month. Wait 1 month. Then buy. Now, we can all bask in the glory of our 1 dollar condo! WOOOOOHOOOOO!!!

  51. anon Says:

    ^ No desperation quite so pathetic as straw man desperation, is there? ^

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