You guys all know by now that I am incredibly bearish on Canadian housing, especially around the Vancouver and Toronto areas. If not, go check out where I wrote about it before, and then check out how I’m thinking of shorting it. (Aside: that trade would be down some 10% in about a month, in case any of you have any hope that I know what the hell I’m talking about.)

So let’s take a look at how the market has done since I wrote my original piece, back in March. We’ll focus on Vancouver, for reasons that’ll become apparent in a minute. First of all, let’s look at the average home price, shall we?

Wow. The average price fell about 15%, just in 8 months. Considering the U.S. real estate market fell 36% from peak to trough, that’s quite the decline. Of course, Van City (I can call it that because I’ve been there) still has a ways to fall. The price to income ratio fell from 11x median family income to just under 10x. Hey, baby steps.

Man, I’m bummed out now. How about we look at another stat, like the price to rent ratio. The numbers are from March, so you can automatically deduct 15% off everything. Not that it matters.


Let me crunch the numbers for those of you. See the number for Greater Vancouver? It’s 46. Let’s be generous and round it down to 40, to factor in the recent price declines. That’s a cap rate of 2.5%. A five year fixed mortgage can be obtained for 2.99% these days, meaning a typical rental in Vancouver doesn’t even spin off enough cash to cover the interest on the mortgage. Any taxes, maintenance or insurance on the place would only increase the yearly loss for the landlord.

The only reason Vancouver real estate is reachable for the average family is due to low interest rates. Assuming 10% down on an average priced home, ($68,000 down on a $680,000 average price, 25 year amortization) a 5 year fixed mortgage will set you back a mere $2893 per month. Chump change, really.

What happens if that 5 year rate increases, to say 4.99%? You’re looking at $3556 per month, every month. You’re easily topping $4000 once you factor in property taxes and insurance. Ouch. I’d recommend hitting up the chip guy for outdates, considering how you’d barely be able to afford to eat.

And yet, considering all that, Daisy from Add Vodka decided that now is a good time to buy a house in Vancouver. Here’s an artist’s rendering of my face when I started reading that post:

Okay Nelson, just calm down. Daisy is a personal finance blogger and Yakezie member. I’m sure she has legitimate reasons  for this purchase. Why don’t you just settle the F down and let her explain herself YOU GREAT BIG BULLY.

Whoa. Why is my superego such a dick? Oh, wait.

Daisy, take it away.

I didn’t want to say anything during our house hunting process because, frankly, I don’t want anybody’s opinions

Yeah! Opinions are like assholes – everyone’s got one and it smells like crap. Except mine.

Wait, I’m not sure if that’s how that saying goes. Oh well, it’s typed on a computer, there’s no changing it now.

Okay, so Dais (can I call you Dais? We’re pals, right?) doesn’t want to hear the opinion of some dumbass blogger who is definitely not funny. Okay, how about some really smart people who get paid a lot of money to look at this kind of stuff?

“BMO Nesbitt Burns wonders how long low interest rates will be able to prop up real estate prices, cautioning that it time to fasten seat-belts because ‘Vancouver’s market is on the down slope of its historical roller-coaster ride.’” (source)

What? BMO Nesbitt who? More like BMO Nesbitt Wrong, amirite Dais?

least of all those of a few of uneducated, bitter, chauvinistic bloggers who have nothing better to do than comment on my posts

HEY! I may be uneducated and bitter, but that doesn’t mean I’m that third thing you mentioned. I don’t know what it means, being how I’m so unedumacated. See? I can’t even spell.

I always love that argument. You have nothing better to do than to comment on my blog! The joke’s on you! Then what exactly does it say about the person who creates and updates a blog that’s nothing more than a narcissistic recap of their boring life?

“Vancouver’s home prices are down 12 percent from year-ago peak levels but still average $733,000. Toronto’s average is about $517,000. ‘Not sustainable, my friends,’ writes Rosenberg (economist for Gluskin Sheff and formerly Merrill Lynch)” (source)

Economist? Who let that uneducated moron in here?

I’m the first to admit that and I’m not in denial over the whole thing; I know the differences between renting an apartment and owning a 2500 sq foot home and being landlords will be vast.

Two things:

1. Is there no such thing as a starter home in Vancouver?

2. She’s going to be a landlord? Excuse me for a second.


Take it from somebody who’s in the business. It’s not easy.

Blahblahblah Vancouver housing market blah blah, criticize, hate mail… etc

Well, I’m convinced. There’s a reasonable argument if I’ve ever heard one.

Everybody pay attention, because this is the message I want you to get from this post. Daisy has no reasonable argument that the Vancouver real estate market is a good place to invest. All the metrics point to it being a bad place to be. And yet, instead of, you know, analyzing some g.d. data, she just went ahead and did what she wanted. It’s the adult version of sticking your fingers in your ears and shouting “LALALALALALA” as loud as you can.

This is an extreme case of confirmation bias, and something that will kill you as an investor. She didn’t buy a house because it was a prudent thing to do, she bought it because she wanted it so bad and can we Mom, please can we, I’ll take care of it all by myself I PROMISE WHY WON’T YOU LET ME BUY A HOUSE?!?!?!?1111

According to her about page, she is in her “(early) 20s” and currently owes approximately $23k in vehicle and student loan debt. She graduated with a business admin degree in August, (heh, irony) and has been working full time since. When I think of people who should be getting into a half million worth of debt, I think of a fresh university graduate who still has consumer debt, don’t you?

Don’t do this. Don’t do it when you buy a stock, and sweet Jesus don’t do it when you plunk down a half a million dollars on a house. Do you realize how badly you can get squashed if your gigantically levered bet goes against you?

I get buying a house. I’m currently writing this post in a house that is worth less than what I paid for it, ($10-20k) so I even understand that buying a house isn’t just a decision about money. But come on. At least try to look at it logically.

Tell everyone, yo!