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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Email: village_whisperer@live.ca
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Today let's compare Vancouver/Seattle

With Australia beginning their housing collapse, Canada is left as the last major country in the western world whose housing market has yet to crumble.

And within Canada, Vancouver is the clear real estate bubble capital.

From time to time it's fun to compare houses for sale in Vancouver with properties for sale elsewhere in North America to see what your dollar will buy.

Yesterday our friends over at the  Vancouver Real Estate Ancedote Archive (VREAA) came up with another stunning comparison. This is a house on Vancouver's toney west side at 4411 West 11th Avenue (click on images to enlarge).

This 'palatial' estate sold on February 15, 2011 for $2,830,000. 

And what did you get for almost $3 million dollars?

It bought you a 4,696 sqft single family house on a 63×121 lot (7,623 sqft; 0.175 acres). With five bedrooms and five bathrooms, this cozy abode backs onto a commercial laneway that services the businesses along West 10th Avenue (see satellite photo above).

The real estate listing promotes an oversized living area, formal dining room, family room & open plan kitchen with vaulted ceilings, eating area & French doors leading to the huge back "deck". Upstairs find the large master bedroom with ensuite & private deck plus 2 more bdrms. Out back there is a "fabulous & private yard" with terraced garden rooms, serene pond & mature landscaping. As a bonus, there are 2 self contained 1 bdrm suites below. To account for the fact the house backs a busy commerical lane servicing businesses on the other side, the listing advises you are "steps" away from the 'Point Grey Village' shopping area.

Paradise personified.

Now let's travel 2 hours south of Vancouver to Redmond Washington, a suburb of Seattle located just 16 miles east of the Emerald City.

Redmond is best known as the home of Microsoft and Nintendo-USA. Due to its large population of highly paid technology workers (especially those of Microsoft), Redmond is a very affluent community.

Over at 3018 W. Lake Sammamish Parkway NE we have a house that sold recently for $2,850,000.

So what does the same amount of money that bought you a cramped house in Vancouver (with 2 mortgage helpers and backing onto a commercial district) get you in Redmond Washington?

Well how about a 5,040 sgft single family house on a 17,859 square foot lot (0.41 acres).

And not just any lot. 

This home is 110' of preeminent, level lakeside waterfront. Not only do you get a spacious 4 bedroom, 4 bathroom home but it has it's own sandy beach, boat launch, boat lifts, seaplane lift, pool, and spa. Terrific privacy, with front row expansive lake, mountain and coastline views from nearly every room.

Check out the pics (click to enlarge):

 

$3 million dollars in Vancouver vs $3 million dollars in Seattle.

Any questions?

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Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.