Another example of our irrational real estate market (UPDATE: see end of post for more Oly photos)

The irrational march upward carries on and not just in Vancouver proper.

Today's treatsie is this 5 bedroom, 3 bathroom 3,000 sq. ft. home sitting on a 12,160 sq. ft. lot is the suburb of Coquitlam.

You can see the realtor's listing here (with many more photos).

According to listing agent Josh Bath, this home hit the market last Friday. On the weekend 120 potential buyers came through and the house received 15 offers.

The house was last sold in 1990 for $200,000.

On Friday it was listed for sale at $639,900.

So what did the feeding frenzy produce? A final sale of $688,500... $48,600 over asking price.

Said the agent, “The previous owners of this home owned it for 19 years and after raising their family and renovating, decided to downsize to a town home. The features that really sold this home were definitely the neighbourhood and the yard."

No Josh, the features that really sold this home were ultra low interest rates and a 'buy now or be priced out forever' mindset.

Olympic Pics (click on images to enlarge)

It was a picture postcard sunny day in Vancouver today and the views were stunning. We do this to tease the media. Fear not, tho... it will piss rain for the Opening Ceremonies and Day 1 on Friday.

Below is a picture of the newly set up German House right next to the Seabus.

Next is a shot from near the Cambie Bridge. This is the east end of False Creek. Science World (the big dome) is transformed into Russia House (and is promoting the Sochi 2014 Winter Olympics). The big Q is where Quebec House is. On the left is GM Place, renamed Canada Hockey Place for the Olympics.

The big draw hockey games are at Canada Hockey Place. Other games are also at the new UBC Thunderbird Arena. Below is a picture taken today of the transformed Arena, ready for the Games.

Even the police are out enjoying the Sun at Thunderbird Arena.

Speaking of Russia House, here is the countdown clock to the 2014 Winter Games.

I notice that the Russian athletes have now staked out their turf at the Village.

More photos to come...
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Jeff Rubin: Housing in for shock... prices to drop 25% or more?

Jeff Rubin was the chief economist at CIBC World Markets for 20 years. He was one of the first economists to accurately predict soaring oil prices back in 2000 and is now a popular commentator on oil depletion and its economic repercussions.

He argued that it wasn't sub-prime mortgages, but record oil prices that drove the world economy into its deepest post-war recession.

Speaking of mortgages, he has some advice for Canadians currently holding a mortgage.

Look at your current situation and ask yourself a long, hard question: just how big a mortgage can you carry?

• "When money is free, it’s hard not to borrow it, even if the lender keeps warning you to be vigilant against debt. That’s exactly what Bank of Canada Governor Mark Carney has been telling Canadians while at the same time keeping their cost of borrowing as low as it’s ever been.
  
  Today’s inflation rate is no more sustainable than today’s interest rates... And this time the inflationary fallout won’t just be in the energy component of the Consumer Price Index. The impact will be much broader...
  
  Stress test your floating-rate mortgage three or four percentage points from today’s level and take a good, long look at the resulting increase in your monthly mortgage payment. For some homeowners, that could be as much as another $1000 per month.
  
  Twenty years ago a similar shock to borrowing rates caused Canadian housing prices to fall by an unprecedented 25 per cent. I know because I called it.
  
  That call was as much about where interest rates were going as it was about where housing prices were heading. Based on current borrowing rates, today’s homeowners will be facing almost as large an increase as they did back then.
  
  So heed Governor Carney’s caution when you decide how big a mortgage you can really afford to carry. Because once the Bank of Canada starts raising your mortgage rate, it will be a very long time before they stop."

You all know I completely agree with Rubin on this, it's exactly what I, and the other members of the Rainforest Roundtable, have been saying all year long.

When it comes, however, the drop in real estate prices in Vancouver will be much steeper than it was 20 years ago.

I stand by my prediction of at least a 40% drop in single family home prices and a 50% drop in condo prices.

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Greater Vancouver House Prices and Local Incomes

Click on the image above to enlarge.

This is a nice chart put together by the Vancouver Condo Info blog.

Using data from the BC Provincial Government website of BC Stats, our intrepid blogger has put together a graph which compares the increase in local incomes to the run-up in house prices from 2000 to 2007 (which is the last available year of local income statistics from Revenue Canada).

The house price data comes from the house sales data at BC Stats too.

House prices are dramatically outpacing increases in income.

Which brings us to the eternal evaluation of housing prices - regardless of your geographic location: There may be other considerations, but financially speaking, if home prices are out of line with rental prices, wages and wage growth, and jobs, then you are in a dangerous bubble.

And in the Lower Mainland the rental prices for homes are far lower than current mortgage payments while wages and wage growth haven't kept pace with the dramatic rise in prices.

How can anyone possibly think this trend will continue indefinitely and that housing prices will keep going up, up, up?

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