[Canada Housing Sentiment]

Nodnub,

 

I'd agree with most of what you said.  The Vancouver housing market is in a bubble, and will almost certainly correct significantly in real terms.  The typical ratio between median household incomes and median housing prices is about 3.  Even if you consider Vancouver attractive enough to warrant twice that ratio, Vancouver at the peak was somewhere areound 9.  So, that would imply a 33-35% correction.

 

The price to rent ratio is out of whack too.  Not so much as it used to be because of falling rates, but if you're buying, you probably shouldn't get a 30-year amortization mortgage on the assumption that mortgage rates will remain at multi-generational lows for the next few decades.  If you assume reasonable long term interest rates, the price to rent ratio is insane.  (When I looked at it last summer, the typical family would have had to spend 70% of their gross income to buy the average house with 25% down.)

 

The correction is extremely likely to happen in real prices falling rather than rents rising, because rents are constrained by rationality more than prices.  If you earn 60K, you really won't rent something that takes 50% of your gross income, whereas if you're buying, you can do that, because someone will lend you the money even if you're unlikely to be able to afford it.

 

So, I think the most likely scenario is falling prices in Vancouver.  (That said, I'm talking my book since I'm someone in Vancouver who could afford to buy, but is renting.)

 

[Vancouver, B.C. Board Gathering]

Barring a conflicting commitment, I would attend.