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Sitting
Out
This pair made a cool million in the
housing market. Here’s why, for now, they’re
back to renting
By Jim Sutherland
In 2002 Felicity Stone and Jim Patton stumbled onto
the real-estate mother lode, trading up from a house
in rural Langley to a thoughtfully designed home on
two acres in the Elgin Chantrell area of South Surrey.
Patton, a communications consultant, and Stone, who
works in public relations, were happy to pour work and
money into the place, expecting to live there the rest
of their lives. Then their outlook began to change.
Much as they loved the 1962 gem, they also saw what
nearby property was selling for. In August 2007 they
decided to list, and by November they’d accepted
$1.616 million—a 240 percent increase from the
$475,000 they’d paid a half-decade earlier. Now
they’re renting a house in the Bayridge area of
West Van, paying $2,500 a month while they watch the
market and wait for prices to drop.
Add two more people to Vancouver’s rapidly growing
crowd of real-estate bears—those who believe that
the price escalation of recent years is about to be
followed by an equally dramatic fall. On the various
blogs and forums where the most committed spend many
of their waking hours, the keening is almost palpable;
news of price increases and condo sellouts is met with
denial and derision for the saps and speculators who
make the travesty possible; gleeful celebration accompanies
every faltering-market signal or news item detailing
further distress in American cities. Typical is this
quote from Solipsist, on the Vancouver (Un)real Estate
blog:
“The collapse of the U.S. dollar
and economy, and perhaps U.S. society? They are going
down, and we, and a good part of the world will be going
down with them.” Or, as General Zod writes on
a blog maintained by local realtor Rob Chipman: “Price
cuts and more price cuts… Foreclosures spike.
All downhill from there, baby.” Spend time lurking
in these dark places and you will become convinced that
real estate, if not western civilization, is headed
for the kind of vengeance and decay usually restricted
to the Old Testament and William Gibson novels.
And indeed, there seems almost no way the bears can
be wrong. In a city where fewer and fewer can afford
to buy, and where investors complain that rents don’t
come close to covering expenses, how can a rise of the
magnitude Vancouver has seen over the past six years
not be followed by an imminent fall? Especially when
other markets, not just in the U.S. but around the world
and even next door in Alberta, are also fading? A downturn
seems inevitable—and this in a city where downturns
have a history of being dramatic, if not catastrophic.
Yet there’s still no hard evidence that a correction
is under way or even around the corner. MLS statistics
released in early February showed prices continuing
their steady rise even as listings grew faster than
sales (which is normal early in the year). In this gradually
slowing but still robust market, multiple offers remain
common and some homes sell above asking even as others
endure price cuts or sit empty. In fact, the early days
of 2008 proved as strong as those of 2007, a year that
produced the 15 percent or so rise in average prices
that seems to have become automatic.
This was no surprise to economists—generally regarded
on the bear blogs as shills for the real-estate industry
but nevertheless guilty of consistently underestimating
the growth in prices. Relying on hard data rather than
quiverings in the gut, they’ve sheepishly forecast
yet another year of moderate increases. After all, the
population continues to grow, land remains scarce, construction
costs escalate, and affordability is actually improving,
thanks to dropping interest rates. And wouldn’t
you know it, despite all the bad news south of the border,
Statistics Canada released figures in mid-February showing
B.C. employment at a historic high.
So it’s not clear in what direction real estate
is headed. What is clear is that dipping into the market
requires extra vigilance. If—when?—real
estate does plateau or drop, the strategies that have
worked well in recent years will need to be rethought
or, in some cases, reversed.
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