No End In Sight

Our good friend Cameron Muir Chief Economist of the British Columbia Real Estate Association says that he is “now convinced that we will never hear the end of housing bubble speak.”

Impending Doom

“The premise is now as firmly entrenched in popular consciousness as carbon emissions and TMZ. It has taken the form of idolatry in the blogosphere, where any countervailing narrative is demonized. It has catapulted university dropouts into media darlings because of a hackneyed webpage and an opinion. It has been tarted up by so-called experts who predict impending doom year after year, despite being completely wrong every time.”

No To Tinted Glasses

“Now, I’m not wearing tinted glasses. Housing markets go up and they go down. However, my point is that sharp and significant declines in home prices are usually created by massive economic shocks, like the 21 per cent mortgage rates and recession of 1982. Yes, there can be short term speculative bubbles that float back to earth after the circus leaves town, but home prices in Vancouver, for example, have been incongruous with other Canadian markets for decades.”

Doom Sayers

“The big test was 2008. That was the year of the doom sayers, when the largest financial crisis since the Great Depression besieged us and the collateral damage hurled us into a global recession, one from which we still haven’t fully recovered. The airwaves were all a buzz with end of the world prophets and those predicting home prices would be chopped in half, at least. It was going to be the big one! The housing market had gone through a significant inflationary period leading up to 2008. Unlike today, speculation was clearly evident. Accusations abounded that Vancouver was overvalued, unsustainable and frothy. One financial institution even had a publication called Housing Bubble Watch, now defunct, in which Vancouver was always the straw man.”

Back In Droves

“So what happened? Home prices fell 15 per cent from peak to trough, but that was short-lived. Indeed, once the clouds of uncertainty dissipated only a few months later, buyers came back in droves. “

Record Level Trigger

“The most dramatic turnaround ever recorded occurred in Vancouver during 2009, when the year began with 1980s level consumer demand and ended with sales tracking near record levels. Prices came right back to where they were before the crisis, and have stayed there, for the most part, for the past three years. If such a severe financial crisis and global recession couldn’t trigger a meltdown of the housing market or pop any asset balloon, what could?”


“The main misconception about housing markets is that they behave like the stock market. They don’t. Bad news can drive stocks lower in a matter of seconds, whereas homes are relatively illiquid; they take a long time to sell and have higher closing costs. In addition, owner-occupiers typically don’t speculate with the family home. In times of hardship, the home is typically the last thing to go. Instead, they hold off on other expenditures like lattes, movie tickets, new TVs and vacations. “


“In a market that has a well-diversified economy and expanding population, fire sales are extremely uncommon. Unless there is household financial catastrophe on a large scale, potential home sellers simply wait until market conditions improve.”

Place Your Bet!

“I write this piece as home sales in Vancouver and many other markets stagnate and homes prices tread water (see the Canadian Real Estate Association’s Multiple Listing Service® Home Price Index for an accurate reading). I have no doubt that the voices of impending doom will soon renew their bellicose refrain. Perhaps their tea leaves will be right this time and the market will indeed collapse, leaving homes selling for 50 cents on the dollar. I’d put my money on that refrain continuing for a long time to come.”

“Copyright British Columbia Real Estate Association. Reprinted with permission.”

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About Larry Yatkowsky

Larry is a recognized real estate expert. A veteran professional, his experienced counsel leads Vancouverites in his west side community to place their trust in a man passionate about his work. Uncompromising ethics bring a balanced approach to realizing your real estate dreams.

When Life Moves You - contact Larry:

*Disclaimer: Statistics Courtesy REBGV. While believed to be accurate they are not guaranteed.
**Numbers provided may vary as they are dynamically posted by the REBGV.

Reader Comments:

Boombust Says:
November 23rd, 2012 at 8:11 pm

“Place your bet”?!


I’ll bet you’ll look like the biggest dunce of all time once the dust settles.

November 23rd, 2012 at 9:41 pm


Larry, you could be right or you could be wrong.

Each of us have our own outlook as to where the market is going, a view that’s is usually very biased depending on whether we are owners of one or many properties or whether we are looking to buy.

You are absolutely right, markets including the stock market or the market for Tulip bulbs go up and down and you would be right if you simply say that markets fluctuate.

There are as many arguments in either direction. In my view, the Greater Vancouver market is on the verge of collapse. You don’t have to pay any respect to my view, it doesn’t really matter. But it is a view that I, in my specific circumstance, feel is right and so I will base my decisions on that view.

I could offer supporting factors such as ballooning Federal, Provincial and Household debt and the fact that sales are plummetting downwards even in an environment of ultra low once-in-a-lifetime mortgage rates and the fact that home ownership at about 70% is already at its peak. But as I keep saying, it doesn`t matter nor does my view does anyone else any good.

But I did say, that the Greater Vancouver market is on the verge of collapse. That means that the average price for a single family home will revert to the mean, i.e. its long term trend, of approximately $650,000. The parabolic rise in the prices over the past few years is unsustainable, just like that Tulip bulb craze in Holland a few centuries ago.

Unbelievable Says:
November 23rd, 2012 at 10:00 pm

Yes Cam, the market did rebound in 2009 because the financial crisis caused the federal government to greatly enhance the accessibility of mortgage funding available to marginal buyers. In fact, this expansion of CMHC created a national housing bubble.

Another point is that financial crises do not cause housing bubbles to collapse— rather, it’s collapsing real estate prices that cause financial crises.

Moreover, you are confusing the formation of a bubble with the collapse of a bubble. The bubble can be measured in many ways— think CAP rates and incomes to price ratios. What is difficult to predict, however, is the collapse of a bubble.

Finally, I’m not sure how one would define the current price drops for Richmond SFH’s and the West Side building lots as stagnant? Yes, the areas with predominantly aspirational buyers are holding their prices, but that can’t last forever; that is, homes in Coquitlam can’t be comparable in price to more central locations that are generally thought of as more desirable.

This market is in trouble, and, not because of those negative bears, but because the top-end of the market is running out of speculative steam (whatever happened to all those foreign buyers who were going to descend upon us after the big O? Seen the Whistler sales fiqures lately? Ugly comes to mind) and the low end is getting squeezed by tougher mortgage lending criteria (sucks to be a move-up buyer, in particular, when the condo you bought in the 2009 run-up is worth less today than it was then). That said, prices are falling for the same reason they always fall— they are just too high.

Form Man Says:
November 24th, 2012 at 7:46 am

Of course there is a housing bubble. Any reasonable examination of the market, statistics, housing formation vs starts, etc indicates this.

There is no question that the correction was averted in 2009 because of extraordinary intervention by the Feds. Unfortunately this intervention did not prevent the bubble from bursting……it simply delayed it, and indeed made the bubble even larger.

Even if one is unwilling to research the data, just take a look around. There is no shortage of housing. The market is heavy with unsold and empty units, with many more under construction.

Cam appears to be a smart guy. Either he is unable to confront reality, or he is purposely attempting to ‘sugarcoat’ the situation. I am unsure which is worse……

Chadmpnp Says:
November 24th, 2012 at 8:40 am

This very bias piece is leaving out many things.

Firstly, it mentions major housing declines usually occur because of an outside economic shock. The 2008 crisis was caused directly because of the housing collapse, not the other way around.

Secondly, if there is another major collapse the gov either doesn’t have many strings to pull to save the market this time, or, they will be unwilling to do so.

Thirdly, there is almost nothing that supports housing prices going higher from here, so even while we might not see a crash of 25% in a year, we may see YoY declines of say 5% a year for 5 years which the more likely of outcomes.

We need more objective articles, the bias wreaks.

reasonfrist Says:
November 24th, 2012 at 9:02 am

I would say it is almost negligent for an economist not to note the huge government and BOC intervention that occurred during the GFC.

Beard of Bees Says:
November 24th, 2012 at 9:28 am

“It has catapulted university dropouts into media darlings because of a hackneyed webpage and an opinion. It has been tarted up by so-called experts who predict impending doom year after year, despite being completely wrong every time.”

Cam is a fascinating guy, and he seems to think credentials matter a great deal: “university dropout”, “hackneyed webpage”, “so-called experts”.

A dubious thesis. Setting that aside, I’m unsure how he even knows the academic credentials of the bloggers he disparages.

Perhaps the highly regarded, and never ridiculed, Mr. Muir could present a coherent argument in response to the recent Robert Shiller: “San Francisco is a bubble city that’s talked about as one of the major boom and bust cities in the U.S.,” Shiller said. “They’re no different in Vancouver, in fact it’s worse in Vancouver.”


OH YAH Says:
November 24th, 2012 at 9:40 am

“It has catapulted university dropouts into media darlings because of a hackneyed webpage and an opinion” -writes the guy whose career whose barrier to entry is a $1000 course

To a hammer, the whole world looks like a nail. To a realtor, there is never a bad time to buy.

Don’t you worry, son. It will all be over soon.

donie Says:
November 24th, 2012 at 10:06 am

Garth Turner’s new house in the ‘416’ danger zone lol


No tinted glasses here either Says:
November 24th, 2012 at 11:06 am

No we never will hear the end of the housing bubble speak at least not until they successfully create a different bubble – commodities.

I’d say rather than idolatry it’s more Campingesque in nature where those who are dissatisfied with their place in life flock to the ‘profiteers’ of economic doom and gloom who promise their flock their sorry state of affairs will be redeemed via an apocalyptic event that will miraculously only befall those they envy and rail against.

These apocolytes as I call them lose all common sense to the point that when the catastrophe doesn’t materialize as predicted it utterly escapes them that their prophet is no seer at all in that he would have foreseen government intervention in 2009 and, that it profits his best interests to keep the date a moving target much like those who, over the past number of years, hyped the December 21, 2012 Mayan doomsday calendar and churned out book after book.

It matters not to these snake oil salesmen with the date upon us now that they now back away because they’ve already achieved what they set out to do…peddle fear of what the other guy is selling to get you to divert your money their way.

Smoking Man Says:
November 24th, 2012 at 5:55 pm

Fantastic comments!

I agree, this is a bubble of massive proportions.

Cam sounds nervous.

Larry, thank your providing this forum for sharing of thoughts. Personally, I see the market continuing to soften in 2013, and the crunch of falling prices will wreak havoc across the province. Thats my opinion.

Ralph Cramdown Says:
November 25th, 2012 at 6:30 am

Well that settles it then. Ad hominem attacks and weak logic carry the day! I especially like the ‘fire sale’ bit. If home prices declined to 5x household income, would that be a ‘fire sale?’

Dear Mr. Muir,
The circus is leaving town, and the clown car is reporting that they’re a clown short.

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