If you’re a buyer, then you may have to settle for a $500,000 tear-down in my neighbourhood
Pete McMartin
Sun
In my neighbourhood this year, the favourite topic of conversation is:
How Much Did The Shack Down The Street Sell For?
The answer always produces gasps. The nondescript 1950s three-bedroom bungalow with the thrashed roof: $430,000! The renovated 1,200 sq. ft. two-bedroom cottage a block off the beach: $479,000! The ghastly three-bedroom cedar-sided dog’s breakfast utterly without charm: $500,000!
Tear-downs — or, at least, anything that in saner markets might be considered as unfit for kennels, much less homes — cannot be had for less than $320,000.
Even harder to believe:
Anything for sale gets sold.
And I don’t know how people do it. It bewilders me, and frightens me, that buyers no longer quail at the idea of the half-million-dollar suburban tract house. That is, the idea that my house, The Hovel, could fetch, as I have been assured, at least $450,000 produces in me two very conflicting emotions.
The first is: Isn’t that nice! I am kind of semi-well-off . . . if I didn’t have a debt load as buoyant as the Titanic.
The second is: When someone is willing to pay $450,000 for my place, or maybe more, I can’t help wondering if it is market forces at work here or some kind of neurosis. The dizzying size of the numbers seem to contradict the comforting and conservative idea of Home. When did home-owning become more like a high-wire act than a safe, long walk down Mortgage Lane? And should I be worried about vertigo?
Cameron Muir thinks not, or at least, that’s what his best guess tells him. Muir is the senior market analyst for the Canada Housing and Mortgage Corporation. He has lived in the same Fraser Valley home since 1986, and I took comfort in the fact that he regards the current housing prices with the same astonishment I do.
From his office window, he can look across the street at a condo development being built where the average unit price is $1,050,000. The development, he has been told, is nearly fully subscribed, and 75 per cent of the buyers are locals.
“As a consumer, I see the prices and I think, well, I like looking at Ferraris, too, but I can’t afford to buy one. Not unless I win the lottery.”
But Muir doesn’t see anything out of the ordinary in this market, either. He doesn’t see it as a bubble about to burst — at least, not in the way it burst in the early 1980s, when runaway inflation and high interest rates had homeowners facing insolvency. A flattening of the market? Maybe. But a full-scale implosion, no.
There is, he said, a lot of money out there chasing both residential and commercial real estate. There is some speculation going on, he suspects, but no wide-scale evidence of the property-flipping that ramped up prices in the frenzy of the early 1980s. And the central banks and lending institutions have become much more vigilant in reining in inflationary forces since the collapse that followed that frenzy, he said.
“The fundamentals for the housing market are very, very strong, more than they have been in the last 10 years.”
A rebounding economy, rising wages, growing inter-provincial and international immigration to B.C., the lowest jobless rate since the Jurassic period, a strong bond market keeping interest rates low — all these forces have conspired to pull housing prices along in the economy’s slipstream.
Add to that the geographic constraints of the Lower Mainland and the accepted wisdom here that one must always pay top dollar for “life-style” rather than mere living accommodations, and voila, million-dollar downtown condos are not the aberrations they appear to be.
(Interesting trend factoid: The average annual price of an apartment condominium in Greater Vancouver, Muir said, has only gone down three times over the last 20 years — in 1995, 1998 and 2001 — and the most it had gone down in any of those years was three per cent. Each year after, he said, the market had always rebounded to wipe out that downward trend.)
What, I asked him, of the accepted wisdom that housing prices will collapse when Baby Boomers all sell their homes at the same time, cash in and downsize?
“Not true. The demand is still going to be there. There will be more than enough people in the Baby Boom Echo generation and in the immigrant population to make up for the sellers. And the Boomers who have sold will create an additional demand because they’ll want all types of housing.”
His long-term prediction?
“Over the next three to four years, the market will be robust. It’s hard to predict over five years, and I am always reluctant to do so.
“The first thing you learn in forecasting school is it’s not how right you are, but how wrong.
“But I would say over the next 10 years, we’re going to see some ups and downs, but overall, homeowners are going to be better off than they were 10 years ago.”
Reassured by this, and taking comfort in his prognosis, a thought came to me only after we hung up.
I forgot to ask him how home buyers would fare.
© The Vancouver Sun 2005
