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May 21, 2019 | Too Human

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

“Well,” blog dog Craig wrote as he emailed me out of the azure, “it’s happening! We are selling our little 1950s house in North Vancouver. The realtor says we have 4 offers so, yes, I’m thinking it is really happening!”

Turns out our kennel colleague was pumped at the thought of (finally) have a nice pile of dough. About $1.5 million, actually. Good insurance against the future when you’re 51 years old with two teenagers, a dog and a cat.

“We think the housing market is going down so we plan to rent for a while. Looking forward to portfolio returns that will pay our rent, so we finally live for free!”

And it was a good plan. When Craig sent me that note four weeks ago it was clear the Van market was starting to seriously roll over. Fortunately cheap mortgages and spring hormones promised enough buyer activity to get them out before the real pain rolled in.

Close, but not close enough as it turned out.

One week later: “A quick update we have an accepted offer.  One subject to be removed on April 30th.  If that happens we will be in contact quickly as closing date is May 10th.

“Renting vs buying another house immediately is not an easy emotional decision.” Craig confessed, “but a good discussion with you and the part of our sale that lets us live rent free in the house until October 1st should help clear the way.”

One week later: “Well that didn’t happen, they couldn’t get financing.  But we do have another offer with no subjects however we haven’t accepted it yet.  If we close it will be quick (May 15th) so we will be in touch.”

And yesterday: “Our house didn’t sell and we took it off the market.  A weird sense of fear over took us when we felt our place had fallen too much in value.  We likely could have sold for 80% of assessment but it seemed like too much of a haircut.”

And then, after Mr. Market had scorned Craig, came the rationalization:

“The plan was not to re-buy but that didn’t seem to matter.  My wife really wanted to retain a home and a rental wasn’t going to do it. As soon as it was becoming real, turning our house into cash I started to worry about what if the stock markets crash and or real estate comes back. So we wimped out and now are looking to add on an addition. A big expensive adventure but at least we will be saving the 100k in Real estate commissions and property transfer tax. Thanks for listening and I’ll keep reading the blog.”

And so it ends. Instead of harvesting a once-per-lifetime windfall gain, Craig & squeeze suffered an attack of humanity. Greed kept them from selling for less than they might have received in other times. So they reaped nothing. Fear prevented them from going liquid. In fact, they’ll  double down on a one-asset strategy, saving $100,000 in realtor commission by spending twice that on more house. Still 50 years old. Three dependents. Even more eggs in one basket. And in a market now in distress.

Fresh evidence that came Tuesday from YVR appraiser Paul Sullivan, of Burgess, Cawley, Sullivan & Associates. Seems the BC Dippers are being spectacularly successful in sucking away tens of billions in real estate equity, crashing sales and messing with people like Craig. The appraiser estimates that in a single year – April to April – Vancouver property owners lost $89.2 billion (with a ‘b’) in equity. More than half of that was in the city proper, while West Van shed close to $8 billion – or $451,485 per household. Ouch!


Postmedia News graphic, REBGV statistics

The culprit? “Demand-side taxes,” he says. The disincentives to buy in the Lower Mainland are now legion. A speculation tax. An empty-houses (or under-utilized) tax. Higher property tax on expensive homes. The foreign buyer tax. And the promise of more to come. Then, of course, there’s the stress test. A perfect governmental storm, concocted by politicians who can’t resist trying to screw with market forces.  “Something has to give,” Sullivan says, as BCers deal with higher taxes and less wealth. (By the way locals have more of their net worth in their homes than anywhere else in Canada, says our central bank.)

Meanwhile a Reuters poll of economists finds an expectation Van prices will fall further throughout 2019. “The major risk right now is with the overextended consumer,” says Peter Norman, chief economist at Altus Group. “With interest rates now leveled off, this risk is sidelined but there continues to be stress in terms of the consumer’s ability to take on increased spending.”

Anyway, there’s today’s tale. One family eschews being millionaires, to invest even more in a single asset class in a place of doom and confusion. Less free, less diversified, less balanced, more at risk, more exposed. Familiarity’s not always the right answer.

But Craig did send me a snap of his dog. Looks worried.

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May 21st, 2019

Posted In: The Greater Fool

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