Media Manipulation

As we look back on the year that was, the dominant theme of 2013 has been media manipulation by the real estate industry.'

Leading the way was MAC Marketing Solutions, the condo marketing firm exposed for lying to and deceiving the public on TV.

But MAC was only the most visible example this year.  Media manipulation in the real estate industry  has been a source of contempt by the likes of this site and other excellent venues like Garth Turner's blog.

Fake mansions, paid individuals in condo line ups to create 'buzz', monthly 'Franken numbers', real estate agents posing as buyers, the list goes on and on.

But nothing is as particularly galling as the real estate press release regurgitated as news. 

Pundits, such as Garth Turner, regularly rail against a lazy and corrupt media who allow themselves to be used as pawns by a gleeful industry more than happy to feed them content.

Each month you can do scan of the nation's media and see a story regurgitated virtually word for word in publication after publication and news broadcast after news broadcast.

And it isn't just the case for real estate. It is the disease of our media today and it is so widespread it has become comical. Check out this example which Conan O'Brien couldn't help but lambast on a recent show:

Why write your own story when you can simply rehash the script from a press release dropped in front of you.  Conan calls it 'scary' and 'frightening', an understatement if we ever heard one. But this type of media manipulation currently shapes everything you read, hear and watch.

Everything.

In the old days, we only had a few threats to fear when it came to media manipulation: the government propagandist and the hustling publicist. They were serious threats, but vigilance worked as a clear and simple defence They were the exceptions rather than the rule—they exploited the fact that the media was trusted and reliable.

The late Andrew Brietbart, a master media manipulator,  once said: “Feeding the media is like training a dog. You can’t throw an entire steak at a dog to train it to sit. You have to give it little bits of steak over and over again until it learns.”

And it's clear the major mainstream media has been well trained.

In our real estate focused country, that's what the real estate manipulator's have artfully achieved - they have trained the media. It's crucial to their business.

Thankfully there are bloggers like Turner, VREAA and the contributors to Vancouver Condo Info whose vigilance is omnipresent.

Today we salute you all.

(For a great holiday game, don't forget to check out: MAC Marketing's version of Where's Waldo")

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Sunday Post #1: Party Pooper

There will be a second post today on the events taking place in Europe. Please check back later.

Back on November 5th, 2011 there was a great little discussion on the Vancouver Real Estate Ancedote Archive (VREAA).

VREAA had picked up on a comment made regarding a Vancouver Sun story titled 'To buy or rent: that is the question'. The comment (made by r_dub71) embodied the mantra of the real estate bulls:

“You lazy spendthrifts have no one to blame but yourselves... I got on the “property ladder” 14 years ago using my RRSP savings to buy a 500 sq.ft. condo, then I moved up to a 2 bedroom, then a townhouse, then a 1/2 duplex, and now am the proud owner of my dream 4 bedroom westside home for my family. Hard work and saving money, keeping my head down and saving and investing like previous generations. It worked then, it still works now. It is doable. Great condos are available in Gastown right now starting at $200k, not that much different than the $165,000 I paid for my first place Downtown in 1997. But everybody wants the easy life, no one wants to work for it!”

Suspend for a moment you desire to debate the validity that buying a property, sitting on it for a year, and then flipping it for a 25% (or greater) profit - without making any improvements whatsoever -somehow classifies as "working for it".

Climbing the 'Property Ladder' is a crucial component of the Real Estate PR machine that says your home is a route to wealth creation.

And the escalation of the housing bubble these past 14 years is what has given it validity.

The author of this ancedote tells you that he took $165,000 in 1997 and has parlayed it into the ability to buy a $2 - 3 million home today. And while we aren't told how much of that $2-3 million is a mortgage, his point is that he has been able to leverage up (via the property ladder) to the point that he can assume a mortgage for such a high valued property.

But as with anything, it is not as simple as just buying into the market, scraping by on Kraft dinner, making the monthly mortgage payments and then becoming a millionaire... althought this is EXACTLY how it is portrayed.

One has to look no further than the R/E page of the this week's Globe and Mail newspaper to understand this.

The G&M hilights the selling history of a condo in South Vancouver and you can easily see the midas touch has not necessarily graced every property you buy.

This particular one-bedroom plus den suite at Retro Lofts near Hudson Street and Marine Drive sold brand new in 2004 for $215,900.

In 2007 it sold for $285,000.

Initially listed in mid September for $335,000, then reduced to $325,000, it sold after 55 days on the market this month for $316,500 - a $100,600 gain over 7 years.

It is really possible to parlay a $100,000 gain over 7 years into the necessary leveraging upwards over 14 years so that you are able to hold a mortgage on a dream 4 bedroom westside home for your family?

The person who posted the anecdote in the Vancouver Sun claims that "hard work and saving money, keeping (his) head down and saving and investing like previous generations" is the tried and tested true formula for obtaining that dream home.

For those who may be wooed by this 'tale' of success, consider this.

The only way r_dub71 will have moved up the property ladder is by buying the maximum house he could afford and taking on the maximum allowed mortgage with each 'transaction'.

Today he is, no doubt, still sitting on a 30 year mortgage for which he continues to scrape and save to maintain as a debt serf.

But it didn't have to be this way.

In 2001 r_dub71 probably made the first of his four sales on the way up the 'property ladder'.

At the time Gold was worth $225 an ounce and Silver was selling for $2 an ounce.

If he had taken his original $165,000 and invested it in Silver, r_dub71 could have bought 82,500 ounces of the shiny metal.

By not buying back into the real estate market, r_dub71 could have spent the last 10 years with a lot more disposable income to spend on his family.

Each month he would have paid half as much on rent as on his mortage. He could have used that extra money to enrich their lives, taken them on numerous vacations, or simply invested the extra money.

And his silver?

Today r_dub71's investment would be worth almost 3 million dollars ($2,887,500 to be exact assuming Silver at $35/ounce) not to mention another $1 million if he had invested the money he had saved over the years by renting.

Today he could have bought that westside dream home outright and not have a mortgage to pay.

But why do that when you could toil for a decade and a half on the 'property ladder' and still be a debt serf?

Can you imagine how left out you would feel at cocktail parties as everyone else talks about real estate and you have nothing to contribute?

Climbing the 'property ladder' is not all that it's cracked up to be. There are many, far more effective means of wealth creation.

But pursuing those won't feed into the property bubble. And that's what the 'property ladder' is all about.

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Tues Post #1: Some reflections on our Housing Bubble

Yesterday we referenced a Vancouver Province article that trumpeted our "Housing Bubble about to burst"

That outcome is not universally accepted and poking around the local blogosphere turned up a couple of items worth passing on to you.

First, over at VREAA, they picked up on a great commented posted in reply a CBC article about the dilemma being faced by the Bank of Canada over interest rates:

• “The housing bubble in Canada is fictional. … If you can’t afford $500K for a 600 sq ft condo, can you afford $450K? Can you afford $400K? The difference is only $400 to $500 a month which in downtown Vancouver is not a lot of money … If you want to live in one of the world’s most densely populated areas, then you pay the price…”

There are a number of 'myths' that get repeated over and over as we try to rationalize and justify our housing bubble. 

They include the idea that our area is different.

That Asian money will support our housing prices even when those prices surpass the ability of local incomes to support it.

There is also the idea that our hamlet is the next Manhattan, the next New York City. It isn't.

The idea that we are running out of land is also repeated ad nausem. Vancouver is NOT one of the most densely populated area's in the world.  As VREAA succinctly notes,

• “This is the kind of throw away comment that is accepted as correct and perpetuates the mania... There will always be some weather/beauty premium on Vancouver over other Canadian cities, but this is currently disproportionately high. Property prices are two to three times fair value determined by fundamentals... In doing so [people] omit the most important cause of the 'insane' RE prices: a massive speculative mania driven by debt."

And evidence of that massive speculative mania driven by debt grows more obvious with each passing month as we compare what you can buy in Vancouver with what is available elsewhere in North America, especially the United States.

Over at Vancouver Condo Info, we get another recent example of this insanity.

Check out this home for sale in upscale West Palm Beach, Florida. It's a 6,898 sq. foot 5 bedroom home on 2.5 acres with a guest house and five car garage (click on images to enlarge).

It appears to have an average kitchen...

But I don't think you can find a theatre room in your 'average' home...

Nor will you find a beautiful pool like this with giant glass enclosure over it...

The price for this palacial hut? $925,000.

Hmmm....

Okay, let's check out Vancouver.  What can you get on the east side in Killarney for $978,000?

How about this 1,958 sq foot, 3 bedroom home on a 41.6x131.8 irregular lot.

Is this what the CBC commenter meant when he says you pay the 'price' to live here?

I would suggest that far more than above average 'price' is being sacraficed to live here right now.... so is rationality.

This will not end well for anyone foolish enough to plunge themselves into massive debt to buy here. How can people not see this?

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Some Sunday musings

A few random thoughts first thing this Sunday morning.

Yesterday we noted how the chief economist for RBC Global Asset Management, Eric Lascelles, argued that by the time many current mortgage holders renew their mortgage that the impact of higher interest rates will be mitigated by three years of rising household incomes.

It is fitting that on the day his comments were covered that shocking GDP figures were released showing that Canada's gross domestic product unexpectedly fell by 0.3 percent in May and that the U.S. economy grew at a meager 1.3 percent in the second quarter.

More importantly growth for the first quarter was revised sharply lower.

And just as data from the first quarter in the US was 'revised' lower, analysts are already looking at the second quarter data and figure that it's not accurate either and will be downgraded as well.

• "Just as Q1 2008 was eventually shown as the start of the great recession so will Q2 2011 in subsequent revisions."

So much for three years of rising household incomes.

Speaking of conditions stagnating, former Chinese central bank adviser Yu Yongding repeated his call for China to reduce its Treasury holdings as the American debate about the debt limit drags on. Speaking to reporters at a briefing in Mumbai on Friday Yu said:

• “U.S. bonds are not safe, but people think they are safe. That is a mirage.”

In March, Yu said that China, the biggest foreign holder of Treasuries with $1.16 trillion of the securities, should halt purchases because of the risk of an eventual default. In June, he predicted that credit agencies would limit the severity of any downgrade of the U.S. rating to avoid investor panic.

As China, Russia, Japan et al slow their purchases of US Treasuries, the US Federal Reserve will have no choice but to launch some form of QE3 to monetize the US debt. Increasingly the US economy (and by extension: Canada's economy) look to be entering the same decade plus malaise that Japan is dealing with.

There was an excellent analogy offered in the comments section over at Vancouver Condo Info yesterday about the actions our governement took during the first phase of the financial crisis (2008-2011):

• "The low emergency rates were supposed to be used as a spare tire, while the regular tire was to get fixed. But they couldn’t afford the repair, and could not buy a new tire as the credit card was maxed, so they ran the spare tire so long the tread is worn and can’t get any traction."

The economy has stalled and conditions are not improving. As the real estate market turns, the impact on Lower Mainland homeowners with high mortgages is going to be severe.

Our friends over on VREAA documented a poignant comment yesterday which represents the situation shared by many who have bought in the last five years in the Lower Mainland.  Calling into the Bill Good radio show, a caller said:

• “I work long hours to be able to pay for a house. I drive long distances to get to and from work. I barely do anything in my expensive house other than sleep and go back to work each day. And on top of that [speaking about the upcoming additional gas tax] every time I turn around I’m being taxed for something else.”

Bill Good replied that he thought the caller was "speaking for thousands of people right now.”

Indeed he is.

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The fickle winds of change.

Along with the west side of the City of Vancouver, the City of Richmond has experienced a surge in house prices as well. And like Vancouver, hot asian money is said to be the reason.

According CBC, home prices in Richmond are skyrocketing.

The Real Estate Board of Greater Vancouver reports that, over the past year, the price for detached homes in the Vancouver suburb has climbed 20% (about $215,000). The median price for a detached home in the Garden City is now hovering just above the $1-million mark, up from $885,000 just six months ago and $879,000 one year ago.

Giddy up.

And according to Patsy Hui, a Richmond real estate agent, it's not the inherent beauty of Richmond that's driving prices: It's the investors. "All kinds of people, but mostly people originated from mainland China," Hui said. The prices may seem high to us, she added, but present a "real deal from a world point of view." One home that sold last year for $1.2 million brought $1.73 million this year, Hui said.

Buy now or be priced out forever, right?

Well... not so fast. In what may become a colossal paradigm shift (although you know damn well the shepple have short memories), Richmond may be about to see an abrupt reversal to that trend.

Remember that little 'shake and slosh' that hit the land of the rising sun two weeks ago?

Seems the images of that stunning 9.0 earthquake and resulting Tsumanmi have struck a chord. As the images of waves sweeping across the flat Japanese countryside, wiping out houses, buildings and airports with relative ease, a realization appears to be taking hold.

And that realization is that the images seen in Japan are not all that far removed from images that we would see in Richmond when the Cascadia subduction zone triggers it's own, long anticipated, 9.0 earthquake and Tsunami down the inside passage and onto our shores.

People aren't stupid. After watching the devestating images from Japan, nervous eyes are glancing at Richmond, which sits below sea level with only a rinky dink little two foot dyke as protection. The predicted 30 metre Tsunami triggered by a 9.0 earthquake would wipe Richmond houses off the face of the earth. As the City of Richmond website notes,

• "Richmond is located on a floodplain. A ‘floodplain’ is: 'land adjacent to a watercourse that is susceptible to flooding', such as from periods of high tide. In addition, isolated instances of flooding can occur in any community as a result of unanticipated weather events. To protect Richmond from the possibility of flooding due to high tides or river floods, the City has constructed a comprehensive system of dykes on Lulu Island. These dykes are over 49 km in length and protect an area of 12,805 ha."

As always our local anecdote archive, VREAA, captures the emerging reprecussions of world events on our little hamlet on the Edge of the Rainforest. Only two months ago, a local realtor was boasting that:

• “One of the owners of a large west side Real Estate company has a friend in Hong Kong who’s been living there 20 yrs. He says that Vancouver's ‘official travel destination’ status from the Chinese government, combined with a restriction on investing in China real estate, has opened the flood gates to dumping money into Vancouver real estate. He says ‘it’s only the beginning’.”

And since all beginings have an end, it appears the... ummm.... tide has turned. The same realtor notes a stunning reversal of fortune barely two months later, and only about 14 days after the Japan earthquake.

• “Funny enough, my buddy is a firefighter and lives in Richmond. He said the same thing. Many ‘For Sale’ signs and no buyers, unlike a month ago. If true, this should be a lesson to all of Vancouver East and West about how fickle the market can be, even with the ‘Asian invasion’ as it is often described.”

Oh my. If the trend plays out, it is a stark example of just how fast things can change.

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Do you see what I see?

As a child, everyone has seen the picture above which is the visual definition of "perception".

Some see the image of a young woman. Others can clearly see the image of an old woman.

Same image, two different perceptions.

And the same can be said of real estate in the Village on the Edge of the Rainforest. Yesterday the little red-headed girl told me she spends her weekends going to open houses, house lust working it's elusive magic.

Sigh.

Don't people see the picture I see?

Bouncing around the Internet today is like going from site to site with confirmation of so many of last year's blog insights playing themselves out in living colour.

Aren't they evident to all?

You've often see me refer to the Vancouver Real Estate Anecdote Archive, a blog which collects anecdotes found on various blogs or in mainstream media. Since most are anonymous, it is impossible to confirm the validity of the comments but they are interesting. What stands out are the number of comments being made by people who are starting to worry about their real estate purchases.

Some recent comments (click on first two words for link):

• “A buddy of mine on the Island put his home on the market in August…..not a sniff. He is freaking out as he had hoped to ‘move-up’ and is carrying a big monthly mortgage.”
  
  “I’m in the financial industry. People are one or two paycheques or missed mortgage payments away from real disaster. I think that bankruptcies will unfortunately become commonplace.”

These comments are reflective of events now unfolding as many of us in the blogosphere have predicted. Yesterday the chief economist of Gluskin Sheff + Associates, David Rosenberg, came out with a report that notes that housing starts, building permits and home prices have slipped.

Canada's recovery from the recession has been fuelled by the boom in the housing sector, a boom which was driven by the emergency level interest rates that sucked so many Canadians into the overpriced housing market over the past year. But that 'stimulus' has run it's course, the 'recovery' is now slowing, and "that goose is no longer laying any golden eggs."

Rosenberg foresees that same scenario we have been fearful of. He expects that a "rising number" of Canadian homeowners won't be able to meet their mortgage payments as interest rates rise and real estate values sink.

"Housing cycles, both up and down, tend to go further than anyone thinks, as we saw occur in the United States, which is still suffering from a post-bubble hangover three years after the initial turn down. Even if this correction in housing is a fraction as harsh as was the case south of the border, the economy, and the financial markets, are likely in for a rude awakening in coming quarters as lower home prices cut into household wealth, confidence and spending plans," said Rosenberg.

This comes out on the same day as a report from the Royal Bank of Canada that says home ownership costs in B.C. are quickly nearing record highs and that the result is that home ownership costs are testing the limits of household budgets. More importantly the report notes that “the Vancouver market is clearly vulnerable to a price correction."

“Generally, we have dismissed the case of housing market bubbles in Canada, but the situation in Vancouver is probably the closest to one in the country,” the report stated.

Interestingly the report calculates that the tenuous Vancouver market chews up more that 65% of pre-tax family income (the highest in the country). But this conclusion is based on buying a house at current prices with 25% down and a 25-year amortized mortgage.

Ummm... does anybody out there have a friend or acquaintance who has bought a house in Vancouver in the last five years who has paid a quarter of the purchase price in cash and has taken out a mortgage that was less than 35 years in length?

Royal's skewed analysis allows it to temper conclusions. Economist's like Rosenberg do not colour their outlook with such diversions.

The fact of the matter is that the finances of most Canadian households are in abysmal shape. As other economic reports have noted, debt is out of control in this country as Canadians have saddled themselves with record mortgage debt (household liabilities now equal 145% of earned income). Six in ten Canadians now live paycheque to paycheque. 40% are not even trying to save money anymore because there is no money left over after daily expenses.

The writing is on the wall for real estate in our little hamlet which sits on the Edge of the Rainforest. We will be ground zero for a massive real estate collapse.

Don't you see what I do?

Meanwhile... more on 'all that glitters'

Bloomberg reports that the U.S. Mint has suspended sales of its 1-ounce American Eagle gold coins after soaring commodity prices led collectors and investors to deplete supplies. It is the first time in two decades that the Mint halted sales of the coins.

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Show me the money

Ultimately the great debate about real estate in the Village on the Edge of the Rainforest will come down to prices.

Will prices go up, stagnate or decline?

All these discussions about declining year over year monthly sales and building months of inventory, while indicators of what comes next, are moot until the 'what-comes-next' happens.

And it is the 'hard facts' which are now starting to appear.

What is fascinating is the depth of the declines we are seeing from the get-go with developers.

We've posted about prices being down 40-50% in the Okanagan. We've talked about Bob Rennie slashing 40% off new units at Invue in Kelowna and at Fairmont Estates in Vancouver. Up in Whistler we took a look at a condo which had been put up for court-ordered sale at 40% off the original 2002 sale price (it has now sold). Two days ago we profiled Watermark Developments discounting prices 35% below 2006 pre-sales prices.

Even to the casual observer, this is a steep and shocking start to this chapter in the real estate saga.

But as I have posted before, despite these examples, this will be a slow melt. The mainstream public is still oblivious to what is going on.

Those who don't have to sell, won't... at least for a little while yet.

They will pull listings or steadfastly refuse to budge on outrageous asking prices convinced that what we are experiencing is a temporary 'dip'... which is what most mainstream owners view the 2008/2009 pullback as. A temporary dip.

Only those who have to sell, will cut prices. Those going through divorce, settling estates because of a family member's death, or those displaced and forced to move elsewhere.

There is a another dynamic we will see though. And is it the looming wave of retiring boomers.

Boomers have never been great savers. Spending what they have and 'enjoying life', their plan has long been to use their massively appreciated real estate as their retirement fund.

Statistics show that 70% of boomers have not saved adequately for retirement if at all. Their retirement 'plan' lies in tapping the giant equity jackpot of the massive real estate bubble that has blown around us.

But as sales drop dramatically, as months of inventory build... a stagnating real estate market is fodder for the one demographic beyond the three D's (divorce, death, displacement) who will reduce their price to sell.

Faithful readers will recall one such example we cited in the middle of July.

Promoted as an outstanding Dunbar character home in immaculate, move-in condition, this 3,359 square foot 4 bedroom, 2 bathroom home which sits on a 6,700 square foot lot was offered for sale.

Originally listed for sale at $1.549,000 on June 7th, 2010, the price was reduced on June 12th, 2010 the asking price was reduced to $1.449,000 (a reduction of $100,000) a mere 5 days after the property was originally listed!

And with no one jumping in on that, the seller obviously received an offer from a buyer sensing the desperation and on July 6th, 2010 the home sold for $1,340,000 (another $109,000 shaved off the latest asking price).

That's a total drop of $209,000 (or 13.5%) off the original asking price with a property only on the market for a month.

More recently is this example at 3042 West 33rd Avenue in Dunbar from our friends over at VREAA.

This 2,489 sqft home on a 50×133 lot was listed on May 28th, 2010 for $1,638,000.

On June 22nd, 2010 the asking price was dropped to $1,580,000, then to $1,550,000 and then yanked from the market on Aug 31st, 2010.

Later that day the property was relisted with and asking price of $1,499,000.

It finally sold on September 19th, 2010 for $1,370,000... $268,000 less than the original asking price (just over 16%).

Both of these are a far cry from the 40-50% examples above, but provide evidence that there are desperate sellers who will move their price to see a sale.

If the market continues to stagnate, more and more boomers who have to sell will overcome resistance and cut prices.

That 'stubbornness' giving way to compromise can be seen in this Kelowna offering which a faithful reader has passed on to us.

Located at 740 Wilson Avenue, faithful reader advises that they have been watching this house for the past 6 months when it was listed in late April or early May.

Mortgage free, the now retired owner was hoping to reap the capital gains from a home which has appreciated rapidly these past 15 years.

The house was originally listed at $429,000 and quickly dropped to $399,000.

With no offers received whatsoever, the owner was no doubt shocked when a similar house across the street was listed for $340,000 - an asking almost $89,000 less that her original asking price. That lowball house sold within a month!

In July, the owner was offered $375,000... and promptly rejected.

Now, several months later, the asking price has been reduced to $344,000. Stubbornness is beginning to give way to desperation.

Faithful reader offers this observation on the Kelowna market:

• "I know other people in Kelowna who are also trying to sell their houses. Unfortunately many of them are mortgaged to the max and can't drop the price even a penny. And so they linger on the market for months and months. And there are many others, people in their 30s, who bought at the height of the boom (presales happened in Kelowna too), and are now sitting in negative equity territory, or pretty close. I know a few who are amateur landlords-and the rent doesn't even cover the mortgage! Everyone was convinced they would get rich by owning real estate. Why buy one place when you can buy 2 or 3? And I don't think it will get any better... there are lots of condos for sale, and according a realtor friend of mine, a huge inventory of condos that aren't listed-people waiting for the market to "recover" before they list.?"

MOI, declining year over year monthly sales totals... they are only symptoms.

It's all about results... about values.

The developers are slashing 40-50% and saying, "SHOW ME THE MONEY".

The boomers who are depending on their homes as retirement funds have to sell and are starting to say, "SHOW ME THE MONEY".

We will see what the result is in the coming months.

(What about you? Are there any properties you have been watching that have been dropping their asking price? If yes, drop me an email and tell me about it.)

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Is the price collapse on Vancouver's west side accelerating?

More evidence that reality is somewhat divergent from the R/E 'spin'.

Faithful readers will recall that last month the R/E propaganda machine was attempting to calm jitters about a significant real estate turnaround.

You can't hide declining sales numbers, but panicking sellers were 'soothed' with news that 'Hot Asian Money' (HAM) was maintaining property values, particularly on the west side of the City of Vancouver.

Headlining this message on June 12th was our buddy Cameron Muir from the BC Real Estate Association who specifically talked about 'HAM' maintaining west side market values:

Perhaps this reassurance would calm nervous buyers and keep them dashing into the market, a move which would support market prices?

Well, as we already know, the Real Estate Board of Greater Vancouver (REBGV) statistics for the month of June 2010 came out and the numbers didn't reflect Muir's appraisal of the situation..

On the west side of Vancouver, where all the supposed 'HAM' money was supporting real estate values, the benchmark price for detached homes dropped a significant $91,000 from May to June.

And now... in the middle of July... it appears the downward slide continues.

As noted on VREAA the above pictured house at 3540 West 40th Avenue provides a snapshot of what could be an accelerating collapse.

Promoted as an outstanding Dunbar character home in immaculate, move-in condition, this 3,359 square foot 4 bedroom, 2 bathroom home sits on a 6,700 square foot lot.

It was touted as having been maintained in pristine condition with a high basement ceiling and large unfinished area with great suite potential if needed. The home was originally listed for sale at $1.549,000 on June 7th, 2010.

Hot Asian Money didn't exactly rush in to trigger a bidding war.

Instead what we witnessed was something more akin to a seller desperate to move the property.

On June 12th, 2010 the asking price was reduced to $1.449,000 - a reduction of $100,000 in the blink of an eye 5 days after the property was originally listed!

And with no one jumping in on that, the seller obviously received an offer from a buyer sensing the desperation.

On July 6th, 2010 the home sold for $1,340,000, yet another $109,000 shaved off the latest asking price.

That's a total drop of $209,000 (or 13.5%) off the original asking price... a far cry from several months ago when bidding wars were triggering sales in a day after listing at well over asking pricse.

More significant in all of this are the background details of this sale.

This home had been held by the owner for over 40 years. At first blush you would conclude that the sale is no big deal because the owner could obviously come down significantly from their asking price and still make a huge profit.

Which is true. And that is very telling.

As we have talked about before, a chilling dynamic will be hitting real estate in Canada over the next 15 years.

The first wave of Boomers are hitting retirement age this year. Statistics show that over 70% of these Boomers do not have adequate funds set aside for retirement. Their whole retirement 'plan' lies in selling their home, downsizing, and using the left over money for their retirement years.

In this cases, holding out for 10 or 15 months to get that optimal 'asking price' is probably not an option... especially if fears of a declining market start to grip the general public.

I suspect you will start to see more of this; long-time west side owners listing their homes and then quickly and dramatically slashing their asking price in order to realize the sale.

The chilling fact is that anyone who bought in this area in March/April (at the top of the market) is suddenly $210,000 underwater from their purchase price. And if the benchmark price continues to plunge, other Boomers will fall over themselves as they drop their asking prices in a desperate attempt to close that sale. Remember, even at 50% off current asking prices, any real estate sale represents a stunning profit over what these owners paid 40 years ago. And as momentum builds, latter Boomers will be frantic to salvage what they can from their retirement 'plan'.

Fear.

For Boomers who have all their retirement plans wrapped up in the value of their house, it will become 'the' most significant motivating factor.

This particular home owner shaved almost 14% off their asking price when the home was only on the market for 1 month. Imagine what a wave of Boomers will do if their homes languish on the market for almost a year?

We will watch the next 12 months with keen interest.

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Email: village_whisperer@live.ca

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What the hell is a 'Froogle'?

Have you ever heard of the Vancouver Real Estate Anecdote Archive (VREAA) ?

It's a unique blog that was started up in February of 2008 to serve as a repository for accounts of what people are experiencing and observing regarding Vancouver’s real estate boom.

For the most part the blog is a giant collection of quotes (with references as to the source) from the greater real estate community.

Yesterday they added an interesting sidebar to their blog.

Billing it as a 'serialized anecdote', VREAA aims to highlight the personal and social effects of the boom through a Vancouver couple who bought a house in September 2003.

'Froogle Scott' is the online handle of the Vancouver homeowner who will share his story.

From the introduction to the series by VREAA:

• "The 2001-2010 Vancouver RE market has affected our city profoundly, and touched many of us in ways that have changed our lives. We started collecting anecdotes here at VREAA out of a fascination for the personal and social effects of the boom. A similar captivation has led a Vancouver homeowner to write of his own experience, and we are very pleased to bring you his serialized account, with its numerous anecdotes. ‘Froogle Scott’ will share his story of buying a house in Vancouver, and the journey that he and his wife have been on since that day in September 2003. In the first episode, we hear the story of the buying itself. Here begins one couple’s multi-faceted experience of this boom."

The series can be found on the main page of VREAA or you can access a permanent link to the series here.

I'm told comments on the entries are welcome, if you are so inclined.

Maybe someone can ask him what the heck a 'Froogle' is.

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Email: village_whisperer@live.ca
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Please read disclaimer at bottom of blog.