Real Estate Talks

OK, so It's probably obvious to anyone who read my "I'm now renting" thread that I am a bear (short term). In fact, JH isn't that far off when he calls me a specurenter. Nothing to be ashamed of. My best friend and I are both doing it. He is now renting an $800000 penthouse condo in Kelowna (with 18' ceilings, rooftop deck with built-in hot tub and BBQ heaven), for $1600 a month. I've got that 1400' pad with studio space (all utilities included), for $700. We believe strongly that we sold the first of a series of spring bounces that will extend for a few years.

I've noticed a pattern with the new bull member surge...ETB, SB, BB, MS, etc. A bear will present a chart, or piece of evidence, and the bulls will come in and say something like "that's all crap" or "bears are all a bunch of jealous renters". Let me be the first to say---that's all fine---a difference of opinions is what makes this interesting.

What irks me a little, is that for some reason, the bulls think that the burden of proof lies with the bears. As though RE just goes up because "THAT'S JUST WHAT IT DOES", and the bears are obligated to find some reason that this unstoppable train would slow down. I don't believe that is true. I believe that any increase in asset valuation must happen for a reason, especially now, after record run-ups in prices. Keep in mind, I'm talking true appreciation, not inflation.

Let me begin with some reasons why I believe the RE market has doubled (roughly every 10 or so years) for the last 40 years.
1) Gradual acceptance of double income families. Now it is almost fully accepted/expected.
2) Gradual erosion of the usual 25 year 25% down lending standard, peaking with the 0 down 40 year, and now regulated to 5%--35.
3) A cultural demographic spending pattern that is characterized by extreme saving in the early years, then peaks in spending in the years leading up to retirement, I personally only know one or two people in their 45-60 year age group who do not own at least 2 properties.
4) Gradual lowering of interest rates from a historical average of about 8-9%.
5) Oh...and let's not forget the olympics!

I'm not saying that these are the only reasons, but I am saying that we have "fired the cannon" on all of these reasons. At this point, all of these powerful forces in increasing RE prices are nearly played out.

So bulls, please add to my list to explain WHY RE will go up. Instead of hacking on the arguments of the bears...which is quite a bit easier than coming up with independent rational arguments.

Fire away:

I'm expecting intelligent arguments from Jimtan, Thompson, and Silverman (if he comes out of hiding), and hoping for the same from our new bulls.

-P-

"pianoexcellence"]
I've noticed a pattern with the new bull member surge...ETB, SB, BB, MS, etc. A bear will present a chart, or piece of evidence, and the bulls will come in and say something like "that's all crap" or "bears are all a bunch of jealous renters". Let me be the first to say---that's all fine---a difference of opinions is what makes this interesting.

you haven't been paying attention. I've posted so much evidence here I think I should get a degree out of this forum. The piece of evidence now is that real estate IS going up, and sales ARE happening at a usual level. Some bears deny this in the face of pure statistical evidence - I hear some bears still saying real estate is going down even though in some sectors in Vancouver it's been going up the last four months. I guess it's called blind faith

I believe that any increase in asset valuation must happen for a reason, especially now, after record run-ups in prices. Keep in mind, I'm talking true appreciation, not inflation.

real estate goes up due mainly to inflation. There's also supply and demand (low Vancouver supply, high demand) - but by and large appreciation is highly correlated to inflation.

eyesthebye wrote:you haven't ben paying attention. I've posted so much evidence here I think I should get a degree out of this forum. The piece of evidence now is that real estate IS going up, and sales ARE happening. Some bears deny this in the face of pure statistical evidence.

Investors need to be looking through the windshield, not the rear-view mirror.

We can all agree that the stats show an improvement in sales and prices. Do you believe that will continue? if so, why?

My interpretation...it is a spring bounce typical with other markets like Sacramento. Almost every market will correct huge drops like the one from last fall, consolidate, then make another move (either up or down). I believe it will be down. You must believe it will be up. I'm dying to know why...and that's really the gist of this thread. What are your reasons. The bears never said, "look the market went down, therefore it will continue to do so", we said, Here are the reasons the market will go down. It has gone down a little, but because of these reasons, we still believe it will go down more.

BTW, I'll be the first to buy in again when the prices make sense from a "cheaper than rent" standpoint.

piano: thanks for the sane thread.

eyesthebye wrote:real estate goes up due mainly to inflation. There are other factors that will drive the price up such as decreasing supply with increase in demand due to population expansion (also regional pop. increase i.e. Vancouver). But you certainly can't have double RE appreciation without inflation.

eyes, I agree with you on this.
And bears are pointing out that from 2001-2008 Vancouver RE got so far ahead of the historical pattern ("real estate goes up due mainly to inflation") that it is due to regress to the mean.
To put it another way, and to continue in the spirit of piano's thread:
Why did Vancouver RE run so far ahead of inflation 2001-2008?
Are there any credible arguments that Vancouver RE could do any better than inflation going forward?
(as you know, I think it'll do a LOT worse than inflation).

I think RE will go up for a few months because there is apparently no shortage of greater fools with the means to borrow huge sums of money. These people can't see beyond their monthly payment, so they're getting suckered by low interest rates like lambs to the slaughter. I blame government for manipulating free markets and thus enabling all this insanity. I don't really blame the REIC, because they're just doing their job.

Of course, it won't be long before this house of cards comes crashing down. But hey, it hasn't happened yet (which happens to be the typical bull's reasoning).

I am a bull on real estate. That is true. Am I bullish here locally? Not particularly (though opportunities come up from time to time). I have stated that time and again. But you seem to look at this world as a plurality. You either with us or against us.

The Bear:

One who repeats themselves over and over again until they are blue in the face. They will then resort to complaining that others don't understand them. Following that they will challenge their enemy to prove the opposing point. All the while they will never realize that the Bull never cared about the bear except that they were a pest, that the Bull never considered themselves a Bull, only one with a positive outlook who looked for opportunity rather than a place to hide, and that the plurality of Bear/Bull arguments was a waste of time to begin with. They spend all day thinking negatively and then wonder why they have nothing to show for it.

It's never a straight up progression - there will be peaks and valleys along the way. But Vancouver Real Estate in the year 2030 will be a whole heck of a lot more expensive than it is now and if you don't believe that than you are no Bear, you are a fool.

BeatBox wrote:I am a bull on real estate. That is true. Am I bullish here locally? Not particularly (though opportunities come up from time to time). I have stated that time and again. But you seem to look at this world as a plurality. You either with us or against us.

The Bear:

One who repeats themselves over and over again until they are blue in the face. They will then resort to complaining that others don't understand them. Following that they will challenge their enemy to prove the opposing point. All the while they will never realize that the Bull never cared about the bear except that they were a pest, that the Bull never considered themselves a Bull, only one with a positive outlook who looked for opportunity rather than a place to hide, and that the plurality of Bear/Bull arguments was a waste of time to begin with. They spend all day thinking negatively and then wonder why they have nothing to show for it.

It's never a straight up progression - there will be peaks and valleys along the way. But Vancouver Real Estate in the year 2030 will be a whole heck of a lot more expensive than it is now and if you don't believe that than you are no Bear, you are a fool.

When he`s right, he`s right

(and he`s right)

BeatBox wrote:But Vancouver Real Estate in the year 2030 will be a whole heck of a lot more expensive than it is now and if you don't believe that than you are no Bear, you are a fool.

And the $1 put into a GIC will be worth a lot more (nominally) too and if you don't believe that than you are an even greater fool. You can try to ridicule the bears all you like, but none of them will take you seriously unless you can show that you can do logic at at least a grade school level.

BeatBox wrote:One who repeats themselves over and over again until they are blue in the face.

So far, you're describing yourself.

BeatBox wrote:They [bears] will then blah blah blah

Did you not read or understand the OP?

So bulls, please add to my list to explain WHY RE will go up. Instead of hacking on the arguments of the bears...which is quite a bit easier than coming up with independent rational arguments.

BeatBox wrote:But Vancouver Real Estate in the year 2030 will be a whole heck of a lot more expensive than it is now and if you don't believe that than you are no Bear, you are a fool.

More expensive in what sense? Because price rises will follow inflation, as mentioned above and bears are in agreement about? Or because of unrelated appreciation which you have not explained?

A valid argument must consist of more than ad hominem fallacies and unsubstantiated generalizations.

The valid arguments come mostly from Bulls that are using their principle residence as their example. With the exception of Thompson who I believe makes his case quite well also.Consider as well that Thompson may have a long term view that spans a generation. There is bound to be bumps along the road but in the meantime the principle rez has saved a sh-tload in rent, the gains (if any )are tax free, and over 20yrs Thompsons rental income used as servicing the original investment, stacked against appreciation and tied to inflation have left him in a better position than someone who invested in GM or Lehman Bros.
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BeatBox wrote:It's never a straight up progression - there will be peaks and valleys along the way. But Vancouver Real Estate in the year 2030 will be a whole heck of a lot more expensive than it is now and if you don't believe that than you are no Bear, you are a fool.

Nice summary of the classic urban myth, the pervasive fallacy that real estate always go up. Best guess at where general Vancouver real estate values will be in 2030? Exactly the same as today, in real terms. Best guess at where an individual house value will be in 2030? Much lower, it will be 21 years older and obviously worth less unless more money is invested in repair and modernisation. Will real estate values be a whole heck of lot more expensive in 2030? Highly unlikely. Of course there is the old "we are running out of land" fallacy, but in relation to the population the supply of land (for housing) in Canada (& BC) is almost infinite. Maybe we'll see income growth to support higher real estate prices, and those in China and India will continue to accept a much lower standard of living while lending us money to buy crap......then again, monkeys may fly out of my...............

Lost Soul wrote:You can try to ridicule the bears all you like, but none of them will take you seriously unless you can show that you can do logic at at least a grade school level.

+1

I don't think RE is a bad investment, but like any other investment, there are bad times to buy and good times to buy. I see no reason to think that now is a good time to buy RE.

semven wrote:The valid arguments come mostly from Bulls that are using their principle residence as their example.

Well, those aren't the arguments (if you can call them that) presented lately. And what argument are you suggesting? That long-term, a personal residence is a reasonable investment plus a means of forced savings with free rent at the end of it? Is anyone seriously disputing that?

semven wrote: There is bound to be bumps along the road but in the meantime the principle rez has saved a sh-tload in rent, the gains (if any )are tax free, and over 20yrs Thompsons rental income used as servicing the original investment, stacked against appreciation and tied to inflation have left him in a better position than someone who invested in GM or Lehman Bros.

What's that got to do with the question of whether or not Vancouver RE prices are currently overpriced due to a speculative bubble which will continue to correct?

I'm long-term bullish on RE, but we're not arguing about the long term. And that same point has been made here ad nauseum. No wonder bears are forced to repeat themselves if the bulls here don't listen and keep coming up with these ridiculous straw-man fallacies that mis-represent the bear case.

I'll buy again. At some point, I'll buy some multi-family housing outside Vancouver and enjoy a nice income stream from it. But I'm not buying today at these prices because I think they're going lower. That's it.

Consider as well that most Bear arguments dont acknowledge "Fundamentals" being in place to buy until the stage is set for anther "Bubble" as soon as that happens the "masses of asses" will already be buying as a herd because the threshold, and their argument about Bubble mentality will be reborn.
I agree with you Beta, for the short to mid term anyway. You yoursef have to admit though that some of the Bearish arguments representing "Fundamentals" are carrot on a stick examples. By the time they "align" the market will already be in motion either due to prescient investors or easy credit (again)

But Vancouver Real Estate in the year 2030 will be a whole heck of a lot more expensive than it is now...

Keeping with the theme of the thread: Why?