I think you would find the comments to his analysis quite a lot more incisive. “Skewer” is a word that comes to mind.

Here’s a blog post from condohype that is a succinct and incisive analysis of Monte’s analysis:

http://condohype.wordpress.com/2009/02/16/gorillas-in-the-myths/

“because they are blithering ignoramuses who haven’t the first godamned clue of how to differentiate between real estate and a radiator.”

Hey AGT: Here is a challenge for you. Go cruise through the 2004-2006 archives at calculatedrisk, Ben Jones’s thehousingbubbleblog, or any of the numerous housing bubble sites in the US that were active before the peak there.

THEN, go cruise through the NYTimes, the WSJ, cnn.com or wherever you want in the MSM.

I can tell you this: the bloggers were right. They nailed it 100% and the MSM got it 100% wrong.

Now, perhaps in Vancouver the bubble bloggers will be proven wrong. Time will tell. But at least for the US, you are dead wrong that the bloggers were “ignoramuses.”

Moreover, quite frankly, I’m willing to put up my predictions for prices in 2011 against Helmut Pastrick’s, Bob Rennie’s, or any other of the ‘professionals’ that seem to be held in such esteem around here.

I’m happy to say I’m not an “expert” and have never purported to be. Nothing against the experts but I’d rather not adopt the vocab. “Increased downward pressure?” Yeah, I’m out.

I’ve read Paulsen’s article several times. If the premise is that a market correction won’t bring ownership to the affordable shelter-to-income ratio of 30 per cent, I agree. But Paulsen’s conclusions go much further. He says high ownership costs are to be passed on to renters regardless of what the market will bear; that the affordability gap could *widen* as prices fall because of income declines; and that supply and demand “doesn’t function.”

It doesn’t add up.

Rental rates are determined by renters’ ability and willingness to pay. That’s it. Landlords can “desire” higher rents all they want. If no one is willing to rent for the landlord’s asking price, the home sits empty.

B.C.’s median income, adjusted for inflation, has been relatively static since 1980. (Technically, it’s gone down a little.) During this time, we’ve seen real estate boom and bust. So why, with this correction, are incomes expected to fall dramatically? They didn’t double during the boom.

Alex and Frances, you speak very highly of this article. I value your perspectives. Should you have the time, I’d like you to elaborate on your points. I’m interested in hearing more.

Dear Hype,

I don’t often make it a point of replying to individuals too cowardly to post under a real name. (Love Alex or hate him, at least you know who he is.) But since you have elected spread your misunderstanding to multiple blogs, I’ll try to clarify two points:

1.) You claim, “Rental rates are determined by renters’ ability and willingness to pay.” If there were some other place for a renter to live, you might be right. But there isn’t. So as long as demand outstrips supply, renters must either pay the prices landlords set or become homeless.

2.) You also might be right that incomes won’t fall with a minor correction. But I don’t know anyone who would call a 55 per cent drop a minor correction. Whatever factors cause a 55 per cent drop in real estate values would also have an effect on the wider economy, would reduce employment, and would therefore reduce family income available for housing.

Finally, you claim that you’ve read one of the first three articles in a long series “several times.” Thank you for your time. But may I humbly suggest instead that you read the entire series just once?

Monte Paulsen
The Tyee.ca

Today’s installment of Home for All:
http://thetyee.ca/News/2009/02/17/LowCostHomes/

Dear Monte,

1.) You pretend like those living in Vancouver don’t have the option of seeking housing and work outside of Vancouver. Nor do you recognize that landlords do not have carte blanche to raise rents as they see fit, whenever, wherever. True real estate investors, and not the speculators become reluctant landlords, respect that rent increases cannot exceed 4% per year unless a property becomes vacant.

2. ) Vancouver, and BC, have seen 3 major real estate corrections in the past 30 years. Yet household incomes have remained, adjusted for inflation, basically unchanged since the early 1980s. The biggest real estate myth of all is lower real estate prices equals depressed incomes.

Please do come back with statistical evidence for your emotional arguments when you can find them. I don’t own property, so I don’t have a horse in this race. Do you?

Monte, for future reference, the web is full of anonymous posters such as condohype, VHB, CalculatedRisk, and others. Being anonymous does not detract in any way from the arguments they make, should these arguments be backed by sound logic and data. Nor indeed is not being anonymous necessarily a badge of distinction in the eyes of your readers.

What I love the best about the blogger armchairists is that they actually admit that they don’t own property, and know nothing of the way a property is managed or built, but then go off and cite some damned stats (which can be manipulated to show one argument over another).

Pay attention, jesse and HHV or HPV or whatever your name is: I am a retired developer. I have seen some great deals and have had to fall on my sword on others–badly.

The genius of Paulsen’s argument is that demand is built in (pun perhaps intended) to a particular market. The idea that people are not limited to staying in Vancouver is a red herring. When you work in Vancouver, you don’t go off and buy a condo in North Burnaby or a house in Westwood Plateau unless you’ve got a car, can get up an hour before everyone else–and are willing to make those sacrifices.

Largely, you want to buy as close to where you work or have any interest in. Hence, Paulsen’s argument is correct: There is only so much inventory and that market rates cannot be dictated by those who have little or no money. There wasn’t a ton of money around in the last eight years that real estate agents and financiers have been bullshitting us with the falsest of bubbles! Why would people be losing their homes (it’s happening here too, not just the States)??? But notice to effort to buy here, as close to work as possible.

Also, there will be no rebound. Understand this: The market will not come back in any substantive way to “2003 levels” as some have predicted. It will drop significantly because it has too. Bungalows in East Van for 900K and 36 footers in Dunbar for 4M, are the hallmarks of the insanity of what was going on.

Monte speaks to this and explains where we perhaps going based on where we are.

I maintain that it is an absolutely brilliant piece.

I found Paulsen’s article very interesting and well researched. I see some people coming here from that condohype blog to bitch about it.

Sorry, but, most of the people on that blog are bitter, resentful renters who know little about the realities of buying and owning a condo or house in Vancouver. They spend each day arguing over just how bad things are going to really get and relish every dire article like Gollum with the Precious, while cursing anything positive or anyone with a different point of view. It’s a great site to visit if you want to convince yourself to commit suicide, or you want to convince a friend that not all Canadians are polite. Otherwise, it serves no useful purpose.

“who know little about the realities of buying and owning a condo or house in Vancouver. ”

It is just those realities that are about to create a generation of ‘bitter resentful owners’. Enjoy your mortgage!

Frances, let’s see if I can shed some light for you.

1st off, I’m not sure where any local RE bloggers have argued that prices will drop 55% or go back to 2001 levels. You can’t take random comments from people’s blogs and attribute them to the blog owners.

2nd: “If you’re waiting for the market to come back to reality and start corresponding with people’s actual incomes in this city, don’t, because it’s not going to happen.”

Why is this not going to happen? How can anyone make this claim without demonstrating that it is impossible? Do you really expect people to accept a say-so argument based on nothing more than the author’s beliefs without any demonstration of factual support?

Authors were saying the same thing in California, for the same reasons. Pointing this out is not the same as calling Monte an “apologist for the real estate industry.”

There have been plenty of times in Vancouver’s history where local real estate prices were in line with local incomes. Why was that OK then, but somehow now it’s never going to happen again? What’s different this time?

You seem convinced that the influx of migration is responsible for the run-up in prices and that rich immigrants have created a new floor for real estate valuations. Have immigration numbers increased exponentially during the past 7 years? Or is this another “belief” unsupported by empirical evidence?

Could the high home prices have been caused by irrational exuberance both locally and globally? Could rampant speculation have driven up prices? If this is the case, why is Vancouver somehow going to weather the economic storm better than other areas, like say Spain, or Florida, or Vegas, or Arizona etc, all so-called playgrounds for the world’s rich?

When people stop buying properties, prices fall. Only places that sell set the market prices. If the speculator leaves the market, then only people who live and work in Vancouver will be left to buy. Those people will be forced to spend within their means. Prices will then become more in line with local incomes. How close will the two numbers converge? Who knows. But to arbitrarily state that it won’t happen without demonstrating why, using real evidence, and not commonly accepted perceptions, usually echoed by real estate marketers, is intellectually dishonest and people are right to point this out.

I’ve read Monte’s other pieces, they’re good. His 5 myths article had problems, which have been well pointed out. Yes we need to take new steps to solve affordability problems. In the meantime, this discussion is about his “truths” or “myths.”

Obviously some have accepted his argument, others are pointing out the lack of solid evidence in his favour. I don’t see where any bloggers have called him an idiot. And I’ve yet to see any local bloggers make the claim that the market alone will solve the affordability problem.

I second HHV. While there is some chance that Vancouver house prices will not revert to affordable levels seen in past decades, it is based upon many assumptions. I have yet to hear a cogent argument for why Vancouver prices cannot fall beyond an abstract concept of perpetual increasing desirability.

Certainly Mr. Paulsen’s arguments are commensurate with the general feeling of high prices being de facto in this city. It is I suppose a stretch to think Vancouver is invincible to what is happening in other cities with recent price spikes, where prices are now collapsing.

I do enjoy reading Mr. Paulsen’s articles, though perhaps it is worth him playing the devil’s advocate in a future article, at least to air the case for a sustained period of, shall we say, “below potential growth” for housing. I remain convinced many of the arguments against his assertions have validity.

I am disappointed so many use the “you don’t got no experience” card as one of their arguments. I fail to see how this has any relevance to the facts at hand.

Frances:

You cannot explain the market to oblivious, anti-developer renters with a major chip on their shoulder, who want to own a building de facto, without one damn bead of sweat equity.

You were great on NW this morning, by the way…

Actually Frances,

The disagreement is between people like Monty who believe the “correction” will be shallow and temporary, and the people who maintain the 2003-2008 run-up was a once in a lifetime event, and some semblance of sanity will prevail going forwards.

That does not mean prices will fall to the point where average worker-bee can afford a condo in Coal Harbour. It does not mean that Vancouver will stop being expensive (we all know there’s a premium for the scenery and being the only place in Canada with tolerable weather).

Take a look at Monte’s comments relating to the article. He stated explicitly that prices in Vancouver will return to 2008 levels by 2013. It’s that mindset that frustrates those of us in the reality-based community. It’s that mindset that contributed to the mad bubble years we’ve just passed through. It’s that mindset that blithely ignores the pain and suffering that ordinary people are going through now, and will be hit with in the next couple of years.

Alex, as it turns out, I am a home-owner, and I have put a lot of sweat in (and will continue for a long time) to get where I am with a mortgage much larger than I’d like.

I take no glee in the coming recession. I see my friends and acquaintances being laid off, and it’s no fun. I see people losing their homes, and that’s no fun either. What’s most annoying is that people like the bloggers who Alex looks down his nose at, were warning that we needed to take steps to deflate the bubble years ago.

If we had actually done any of the things that the “doom-and-gloom” set had proposed in 2004/5/6/7, we wouldn’t see this mess now.

Finally, I have a vested interest in there being both affordable housing and good job opportunities in this city in the future. I don’t want my kids to have to move to another part of the world because they can’t find decent jobs here, or can’t live in a decent neighbourhood on the salaries that earn.

The way the city has bent over for developers, with the resulting resortification of the place, might be nice for those of you who got your piece of the pie back in the “good-old days”, but it’s not a way to build a sustainable environment for the future.

Green buildings are nice, but when you drive the working and middle classes out, that’s not very environmentally friendly.

Government shouldn’t and can’t afford to build or administrate it.
They’d spend less giving the poor private non-SRO housing rents.
“Affordable” is also relative. To whom is it affordable?

Best

Gölök Zoltán Leenderdt Franco-Assisi Buday
“A Conservative Government is an organized hypocrisy.” — Benjamin
Disraeli (1804-1881), British Prime Minister