It’s cavalier to buy a condo

“Through four downturns over the last 25 years, I’ve learned that the market always comes back. Hold on for the next boom.” –Bob Ransford, former real estate developer

This morning, with the weather being nice, I hit the balcony for a read of Westcoast Homes.  While perusing the fine literature — by fine I mean lack of thickness — I came across a “lessons learned” column by Bob Ransford.

Mr. Ransford’s commentary is probably the closest we can expect for a balanced real estate column in the Sun.  He warns against speculation.  He urges a close look at the fine print before signing a deal.  But like other expert commentaries, much is said about buying opportunities “disappearing” for those who wait.

This is an unfortunate piece of advice.  It plays upon emotion rather than rational assessment.  Buy today or miss your chance!  Don’t let one of the 15,000 active listings disappear! It’s balderdash.

Look, it’s not enough that condo prices are “reduced” from peak levels.  A reduced price doesn’t mean a good price or good value.  A 1991 Chevy Cavalier at 40 per cent off is still a 1991 Chevy Cavalier.

I’ll say it again, the predictable direction of prices in a declining market is in line with rents and local incomes.  To those who want to buy today and “hold on for the next boom,” there will be blood.  I urge you to consider the numbers.

Remember, Chevy Cavalier.

32 Responses to “It’s cavalier to buy a condo”

  1. TUT Says:

    I think that people is learning the lesson, but very slowly. Yet we may understand that some young couples do not like the idea of waiting for their “dream house” (or condo or whatever) and may be fair game for the unethical herd of interested parties that may profit from them and run away with no liability.

    Most of the time we make decisions based on “heart feelings” instead of “rational thinking” and the marketing professionals know it very well.

    in my opinion, any home that requires more than 10-12 years to pay in full by using 25-30% of your gross income is clearly a high risk bet. The fact that taking it may work in some circumstances is not a good reference to take it. Unless you like to play ball real hard. Better size your own ability for risk before jumping in the wagon.

    With actual salaries almost frozen for the last many years and the current incertitude in the job market the risks a even greater and call for a more prudent approach, even if it is not the most desirable.

    And do not worry, buyers out there, there will be plenty of stock for sale when your financial situation becomes more balanced (if ever!).

  2. Observer Says:

    Increasing real estate prices are fueled by strong economies, we are seeing large amounts of unemployment throughout north america, and decreasing GDP.

    Vancouver will not be any different than any other localized economy in North America, wait till all the construction workers are no longer working on Olympic construction projects in late 2009, which should be a large shock to the unemployment stats.

    This down turn in the economy will likely be atleast a year or more before recovery, and the real estate market should be no different, especially when people start to realize 700k for a shoe box sized condo is not anywhere close to what fair market value is, once fear of rising prices is taken out of the decision.

  3. SurreyJoe Says:

    Reading the ‘Westcoast Homes’ section of the Sun is always a treat.

    On page 1 today there were two articles. The first talked about Morningstar Homes dropping prices by 15%. I had thought this was due to a declining market. Apparently no – its been made possible by applying Deming’s time and motion studies to building homes – I couldn’t make this stuff up.

    The second article claims new home choice will be limited this year and next due to declining home starts. Makes it sounds like there will be a shortage. They kind of forgot to mention – houses which commenced construction before 2009 and houses completed but not yet sold. And of course theres always MLS with 15,000 or so listings plus the Fraser Valley. Might be premature to start worrying about shortages of housing.

  4. patriotz Says:

    Surreyjoe, both of these sort of claims were also being made in the US two years ago. The second article also failed to mention the wave of pre-sale defaults which is already under way, and the coming surge in foreclosures.

    This movie is getting pretty boring on the second view.

  5. dingus Says:

    “This movie is getting pretty boring on the second view.”

    Except, as has been previously noted, it’s as if the fast forward is being held down on this run through. I don’t think it’s boring at all. I just find it funny the audience is yelling at the screen as if it made a difference.

  6. jesse Says:

    Bob Ransford, using the past 25 years as an indication of the next 25 years. Maybe, Bob, things ARE different this time. Will prices come back? Sure, but it may be slightly longer than you think and want.

  7. bman Says:

    Hey man,

    I have a 1991 cavalier. Its not so bad! Go easy.

  8. The Urban Dweller Says:

    @ Jesse, I think you are bang on. Of course there will be a rebound it won’t be for another 10 years though. Oh and by rebound I mean significant upward pressure.

    @ Patriotz, you are quite the bear aren’t you. You either love it when people suffer or somehow got effed up in this market. Were you one of the people who thought Yaletown was coming to Surrey? 😉

  9. Many Franks Says:

    Sir, I have read your blog and would like to inquire further about the advertised Chevy Cavalier. Is it still for sale,and if so, for how much?

  10. condohype Says:

    It’s 40 per cent off the original price but that price had appreciation baked in for 2009 delivery. Hey, you gotta pay for luxury vintage. As an added bonus, the buyer keeps the contents of the glove compartment, including a Capitol 6 ticket stub from a screening of Terminator 2. Interested parties should camp overnight at Homer and Helmcken for a chance to make an offer.

  11. Boombust Says:

    Did you see the people “camping out” at H&H on Global News last night?

    One guy said we had “bottomed out” and he was now ready to buy.

    Another recent news story focused on Quattro in Surrey. The presale buyers were trying to wriggle out of their contracts because that area had failed to “improve” since the development began. They were “promised” that it was the new and up and coming “Yaletown”.

    I laughed at that one. They are, of course, merely pi**ed-off flippers who got caught. Serves them right.

  12. Disbelief Says:

    Kudos Condohype (excellent topic) Just wondering how they managed to get people to sleep overnight in tents outside H&H. Truly remarkable really. Although I have a sneaking suspicion that they are homeless getting a warm place to sleep for a change. Don’t worry if you didn’t brave the elements for a chance at a condo that someone else had the intelligence to back out on, there will be plenty where that came from at significant savings so don’t worry. I won’t lose any sleep over it.

  13. dg Says:

    “The Cavalier” should be the new name of any new condo developments.

  14. Disbelief Says:

    I had a wonderful sleep in my own bed and gladly won’t get stuck eh I mean the opportunity to take over someone elses mistake…

  15. sluggo Says:

    Not sure how many lowlifes are paid to camp out in those lineups for discounted condos, but it’s not uncommon for insiders of marketing campaigns to join the fun and adventure of such hype.

    It would also be quite easy for some stooge or insider to catch the attention of a news crew for an interview to claim (with a straight face) that “we have bottomed out”. After all, it could take a lot of searching to find some poor schmuck who would not be embarrassed to make such outrageous claims.

  16. Sumidiot Says:

    There were people camped out ….since Thursday!

    I can imagine the disappointment when they discover only a few of the advertised condos are truly 40% off, and the bulk of the 43 units are near the same price as they’ve always been. I’m not speculating, this was told to me by an agent I asked. But the hype and “Well, we’re here now” will get the investors to pony up the cash regardless.

    And those standing in line are investors, not future residents. It’s amazing these people have time to wait in line when the rest of the city is working.

    I won’t wait in line to eat at a restaurant and would never wait in line for the opportunity to risk my life savings.

  17. dg Says:

    Check out this parody on the real estate downfall.

    Sorry I am not a doom and gloomer but you have to laugh at the insanity of it all.

  18. patriotz Says:

    @ Patriotz, you are quite the bear aren’t you. You either love it when people suffer or somehow got effed up in this market.

    Looks like someone out there hasn’t gotten the message.

    The cause of the current economic crisis is the global RE bubble. The global RE bubble was caused by people paying excessive prices for RE. The people who paid excessive prices for RE are not only directly responsible for their own problems, but for the general economic problems which will have an impact on just about everyone else.

    So quit trying to portray the villains as victims. I and the word are getting just a bit tired of it.

    Got it now, Charlie?

  19. dingus Says:

    But patriotz… THINK OF THE CHILDREN!!!

  20. other ted Says:

    “The Urban Dweller Says:

    February 8, 2009 at 12:10 pm

    @ Patriotz, you are quite the bear aren’t you. You either love it when people suffer or somehow got effed up in this market. Were you one of the people who thought Yaletown was coming to Surrey? ”

    partriotz has been pretty consistent on this board you can check the archives.

    So urban dweller the question is are you bitter and did you get effed up. And if so how does it make you feel better to attack the people who predicted this.

  21. Carioca Canuck Says:

    I didn’t know that Vancouver had a leaky Cavalier problem…….

  22. The Pope Says:

    My favorite bit of term-mangling from that global newscast is that people feel ‘there is a bottom in the air’.

    …so that’s what that smell is!

  23. Observer Says:

    just like the old saying ” picking bottoms leads to stinky fingers”

  24. Urban Dweller Says:

    “So urban dweller the question is are you bitter and did you get effed up. And if so how does it make you feel better to attack the people who predicted this.”

    No actually I’ve sold at the top my properties and knew that eventually we’ll be going down. I sold when stuff down south was going sour and they were pretty much giving people homes they couldn’t afford.

    I just mentioned that because the comments just like the media tends to focus on the negative. People bought at a high price, bully for them. They’ll have to live with that decision. I’m quite comfortable where I am right now. In fact in two years I’ll be putting my money back to work in RE. In a few months I”ll be putting some $$$ to work in the equity markets.

    “buy low, sell high” it really is that simple. Of course due diligence is to be done when making such a financial commitment.

    Also people like to hate on Rennie, why? He’s successful at what he does and I don’t wish he goes down. Stop hating…

    “Looks like someone out there hasn’t gotten the message.”

    I got the message a long time ago thanks, I didn’t need you to outline it for me. Thanks.

  25. Skye Says:

    Don’t have to wait until late 2009, its going to be an “interesting” summer:

    Employers eliminated 129,000 jobs in January in Canada, more than three times expectations [read: govt, economists]. The Canadian unemployment rate hit a four-year high, data showed yesterday. The U.S. unemployment rate rose to the highest level since 1992, the Labor Department reported, while payrolls fell by 598,000, the biggest monthly decline since 1974.

    The USA has the flu, and we have pneumonia. Batten down the hatches!

    @Patriotz: I think a deregulated securities market had more than a little to do with the meltdown, not just irresponsible home buyers.

  26. J Says:

    Urban Dweller:

    Rennie is an incredible marketer – he could proverbially sell ice to eskimos. Respect that if you like.

    I think the greater issue at hand is that he is the “devil”. He’s the person most identifiably responsible (but obviously not solely responsible!) for “making us buy expensive things that we don’t need with money that we don’t have to impress people that we don’t know”.

    Generally I don’t like salesmen. My perception of them is they’re too often motivated solely by moving product by creating a percieved need, rather than moving a product to cater to a real need.

  27. ex-van Says:

    bman Says:
    Hey man,
    I have a 1991 cavalier. Its not so bad! Go easy.

    Gotta agree. Have a buddy that drove a ’88 Cavalier for 15 years. Ran like a champ and carried many good memories of road trips … it’s unfair to compare it to an overpriced shoe-box that will probably be an albatross for decades.

  28. The Urban Dweller Says:

    @ J, agreed I don’t trust a salesperson either. However, they are merely doing their job and Rennie was a freakin genius at it. Don’t blame him for being so good. Blame the retards that bought his tripe and waited to long to flip their “investment”.

  29. patriotz Says:

    @Patriotz: I think a deregulated securities market had more than a little to do with the meltdown, not just irresponsible home buyers.

    The deregulated securities market of course enabled the reckless buying, but you cannot have inflated house prices without buyers willing to pay them. No inflated house prices, no meltdown.

  30. fatcat Says:

    Inflated house prices generate easy revenues to run the provinces and the country. There will be others to replace Paulson et al (the Wall Street gang) and their political nominees. Read “The ascent of money” by Nial Ferguson.

  31. buff_butler Says:

    The tarp makes the car go faster… +10 Horse Power

  32. CJ Says:

    These junk condos don’t rise to the level of a Chevrolet Cavalier. The Cav’s windows don’t leak, you can’t hear the people talking in the next car, and the neighbor’s dog didn’t urinate on its hallway carpet. Plus, if you don’t make payments on the Cavalier they just repo the damn thing. You don’t have to go into bankruptcy and you don’t get sued by Onni’s legal weasels. Plus the tarp on the Cavalier doesn’t cost the U.S. taxpayer a trillion dollars like the TARP bankster bailout does.

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