Affordable housing thoughts

"Lower wage/salary workers deserve a living wage that can purchase proximate shelter that is affordable to a living wage worker."

No one "deserves" proximate shelter. You either can, or cannot, afford proximate shelter. Cities should free up zoning such that, if it is economically justified, proximate shelter will not be impeded merely because of zoning regulations.

"Sustainability is not just an environmental matter but also requires increasing social and economic equity if human settlements and their societies are to be sustainable."

Increasing social and economic equity are not a requirement for society to remain viable. The market will work out whether or not increased social and economic equity are viable because workers can flex their power either democratically or through other forms of opposition to those in power, and right now I do not see a revolution around the corner.

"An increase in graduated/progressive taxes will also be required to create a needed funding base to achieve sufficient affordable housing."

As noted previously, increasing economic equity is not a necessity, but even if it was for equity purposes that would not make it a necessity for increasing affordable housing. Building more affordable housing, while not necessarily a mandate of government, could likely be achieved without increasing taxes by just having government build rental housing and then rent it out to people and lose a marginal amount of money. This is NOT, however, the role of government.
You know what will increase housing affordability? Government not intervening in the market. Government having pretty lax zoning requirements would help, by allowing people to densify as much as they wanted. Government getting rid of CMHC would help, because then the price of homes would not rise just because of the elimination of mortgage risk in the hands of banks. That would help.

Do you know what will happen if you end up putting all of these new taxes in place and trying to force those who aren't poor to pay for everything for everyone else? Those people who are productive will leave and go elsewhere and be productive on their own. Socialism is not the answer. A lot of the problems with capitalism are a result of market intervention and government's attempts to intervene. Housing bubble? CMHC, Fannie Mae, Freddie Mac and unrealistically low government rates. Government is not the answer.

Price update

I thought I would post all the same stuff I normally do each month for the price update.  I didn't do it for November because I was travelling so much.  Sorry!

For a second I thought I had used two decimal places in some of the percentages!  Of course not though... what I would be then?  A monkey failure...

Then again, I left the residual that I use to calc the annualization up top.  That isn't very professional, is it?

The numbers pretty much speak for themselves.  I like that apartment drops have accelerated recently.  

A cap rate over 5%...

http://www.lestwarog.com/thespot/mls_details-V735033.html

By my calculation, about 5.2%.  

And it's a really nice looking place actually... just weird to have two beds both visible from downstairs... weird.  

And the winner is...

Unit 507 at Spectrum I.  Currently priced at a 4.72% cap rate.  The best I've seen so far.  $299,000 for 626 square feet, for $478/sf.  Mr. Unit 507, you are the one setting the trend for everyone else!  You are the one driving down prices at an alarming rate.  You are the one priced 26% below the average cap rate when I first started examining cap rates.  

You, my friend, are helping drive this crash through the floor.  And for that, I thank you.  For every guy like you, prices drop faster, and we reach rent equivalency sooner, and then we go further, and then maybe, just maybe, I will actually buy a home.  But I'm not wedded to that idea.  I've gotten so used to the idea of not having to worry about my housing, and just moving to wherever I feel like living, that I might not want to give it up to be tied down to some brutal investment that concentrates a significant portion of my wealth and moves about with the whims of the retail investor... yech!

Oh James!

Last night, while in the lineup for a bar, I spoke to the marketing girl who had worked on, or approved, that "Oh James!" condo ad.  

I will tell the full story, because it is somewhat entertaining:

I am standing by myself in a lineup for a bar (my friends were already inside) and one of my friends comes out to say hi.  He sees me standing behind an attractive persian girl (with a huge ring on her left ring finger, mind you) and decides to talk to her.  He says something or another, and then goes back inside.  I strike up a conversation with this girl and her friend, because they are talking about real estate.  

I state that the reason I got involved in their conversation is because they are talking about real estate.  The attractive persian girl is a dental hygenist, and she just closed on a condo purchase downtown.  Ouch.  They ask me what my opinion is of the market, and I lay it on in full:

"My real training is in fundamental valuation, and I have no actual real estate experience, so I am sure that you all have a better understanding of real estate than I do, but prices have already dropped 10% from peak, condos prices had at least a fall of 40% to hit fundamental value in the first place, and months of inventory is between 15 and 20, for condos and SFH respectively, in Vancouver right now.  Port Moody is already off more than 30%."  I added a whole lot of other stuff, but that was the gist of it.  

Their first response was that the reason Port Moody was off was because there was a lot of room to build and no one wanted to live there anyways, and that prices would NEVER drop downtown.  I then proceeded to talk about all of the remaining opportunities for densification in Downtown Vancouver, and how there was still significant supply coming to market, leading to significant excess supply in the future.

Seeing that I was depressing them with my logic and facts, I decided to say something comical to try and salvage the conversation and decided to talk about that "Oh James" condo ad.  "I have seen some crazy condo ads lately.  For example, there was this "Oh James" ad..."  

"Oh, I actually worked on developing that ad and I approved it.  So what did you think?"

I wasn't sure how to respond to that without being offensive, but I did my best with: "Well, that ad was featured on Condohype, did you know that?"  Yes, she knew that.  I thought it was very cool that the people who come up with these ads read Condohype.  "Well, I was just going to say exactly what was said about the ad on Condohype and feign some kind of real knowledge and critical thinking, but given that you have already read Condohype I won't."  Self deprecating and less offensive, in that I didn't indicate I actually believed what Condohype said.  She felt that because I remembered it the ad had done its job, and I wasn't in the target demographic anyways because I didn't want to buy.  Meh, I will buy some day when the prices make sense; I said I would buy when prices were down at least 40% from peak.  She laughed at me.  

She noted that everyone always knew the Millennium project was in trouble, and that there were still opportunities to sell in the market, but quality had to be fantastic and pricing very good.  

Months of Inventory

An update on two week MOI from this week's numbers.  

Once again, shocking.  GV SFH MOI above 20 months.  The ring of fire.   First is from Greater Van, and second is from North Van (from Paul's stats). 

Updated housing price changes

Here are alllllllllll the tables everyone really wants to see on housing price changes since the peak, including the annualized figures!

Things look really rough.  This may be the worst crash in North America.  Just shocking...  Look at the annualized drops in September.  This is freefall.  Now the question is how many months of freefall, and how low will it go?  With inventory and drops like this, maybe we'll really overshoot the bottom... we'll see.