Flashback Summer 2005: The cover of Time Magazine was "Why We are Gaga over Real Estate". The same summer people were camping out overnight and entering lotteries, hoping to be one of the lucky ones to be able to buy Florida condo units before they were even built. Prices were rising by the hour.
Flash Forward November 2007: Investors line up for piece of Bloor Street condo
Yes I know Vancouver is the best place in the world to live and metals and commodities have made a lot of people filthy rich, and everyone wants to live in Vancouver.A new condo at Yonge and Bloor Streets is already the hottest property in the city before it even goes on the buyer's market.
Although the sales office at 1 Bloor Street doesn't open for another week, about a dozen people are already lining up to buy a piece of this real estate, which is already being touted as Toronto's version of New York City's posh Fifth Avenue.
The people lining up are mostly real estate agents or people being paid by them to hold their spot in line.
Though they wouldn't say how much they were being paid, some hinted they were being paid between $2,000 and $3,000 for the week.
"We wouldn't be here if it wasn't worth our while," said Sean Sussman, speaking to CTV News while huddled in a lawn chair covered in a sleeping bag.
I also know that all the U.S. baby boomers want to retire to Florida, the demographics are fabulous, etc. The problem is what everyone knows is not worth much. It is worth even less if it's not true. It turns out there has actually been a boomer exodus from Florida. People are sick of hurricanes, insurance, termites, humidity, and crime.
I do not mean to insult Vancouver in one regard. Vancouver is a world class city and Miami is well Miami. But enough is enough. Miami and Vancouver have these things in common.
- Condo Fever. One is a bubble inflating the other is a bubble popping.
- Wages are nowhere near high enough to support prices in either city.
- Real estate prices are way out of line with rental prices.
- When people are standing out in the street, or worse yet paying someone $2,000 to stand in line for them, the party is about to end.
I have heard all the arguments before and no doubt many will email me why "Vancouver is Different". It's not. Yes, Vancouver will command a premium, but not the premium that is now factored in. California thought it was different. "California is not Florida". Sorry folks, California is now crashing and California has a long, long way down before it bottoms.
Now we are hearing "Seattle is different". Of course we heard "Boston is different" before Boston prices started crashing. One of the sillier ideas was that everyone from California would move to Phoenix. That idea lasted a year or two until this question surfaced: Who is everyone in California going to sell their house to? In addition, weather in Phoenix truly sucks unless you like bone dry heat, no water, and plenty of smog.
Real Estate is local was the mantra. It was until it wasn't. Prices are now falling nationally and prices in almost all bubble areas are now falling rapidly. Seattle and Vancouver may be different now, they will not be different two years from now.
This is what we have found in every bubble market to date: Real estate prices cannot sustainedly rise above people's ability to pay for them, nor can real estate prices sustainedly rise above rental prices.
Vancouver flunks both tests. And with condo mania in Vancouver reaching Florida insanity levels, the party is about to be crashed. Want to know the real difference between Miami, San Diego, Phoenix, and Vancouver in regards to housing price action? Here it is: time.
Addendum:
This is what happens when you write at 3:00AM and are too tired.
Somehow I mistook Vancouver for Toronto.
I am told of similar madness in Vancouver and the person that sent me the article lives in Vancouver. So I guess we need to put Toronto into the Super Bowl of Condo insanity as well.
My Vancouver friend just pinged me with this:
Latest Condo piece refers to Vancouver - trouble is you refer to a Bllor and Yonge location....and that is TORONTO.Mike Shedlock / Mish
There is similar madness here - I will send stories if you need them!
Tom
http://globaleconomicanalysis.blogspot.com
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