Why you'd better hope it's different this time - Vancouver housing edition

Mohican provides a nice concise summary of the current state of the Vancouver housing market, complete with lots of to-the-point charts. I recommend that anyone in (or potentially in) the Vancouver housing market give it consideration prior to deciding their next move. Ironically, the collapse of the U.S. housing market, the subsequent economic troubles and the subsequent interest rate cuts may actually keep the Vancouver housing market going a little longer, I guess we'll see.

Anyway, Mohican's post in short:

* Prices have risen dramatically, to say the least, in recent years
* Prices are above the long run inflation adjusted trend
* You'd need an annual income of $113,400 to qualify to buy a typical Vancouver condo with a 25 year amortization and no down payment.
* Price/Income ratios are higher than they were in previous market peaks
* Price/Rent ratios are well above historical averages
* Mortgage Payment/Rent ratios are also well above historical averages
* Population growth is below historical averages
* Housing construction has been above historical averages for the last few years

You know, if there was a media in B.C. that actually had the knowledge and the will to do it's job properly you'd think that some part of this analysis might have shown up once or twice in the thousands of minutes and column inches devoted to the local real estate market. Oh well, thank god for the internet.

Because it's different here / this time / etc.

Via the comments at Vancouver Condo Info, here's a funny article from the CBC on how B.C. is protected from any fallout from the economic problems, with the biggest concern being that people might lose a little confidence because they see all the negative headlines.

"On Tuesday morning the main Canadian index, the S&P/TSX composite, was up 337 points to 12,467 by 11 a.m. ET after it had tumbled 605 points on Monday, while the U.S. market opened with a nosedive after being closed on Monday for a holiday.

Mutual funds and other investments are taking a hit, but B.C.'s economy is relatively protected, say economists.

"We have this commodity and construction boom of epic proportions which is keeping the western provinces essentially at full employment," Aron Gampel, the deputy chief economist of Scotiabank told CBC on Monday."

So the U.S. is going into (is already in) a recession, but it won't affect B.C. because of the commodity boom (and these commodities are being sold to who, exactly?).

Meanwhile, how long will 'a construction boom of epic proportions' last when house prices drop in B.C. like they did in the U.S.?

Consider this chart of U.S. housing starts.

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"SFU business professor Lindsay Meredith sees no black clouds on B.C.'s economic horizon. And he predicts consumers — especially cross-border shoppers — might actually benefit if retailers in the U.S. begin slashing prices."

So, if people cross the border to do their shopping somewhere else, that will be *good* for the B.C. economy? OK then.

I've heard of 'every cloud has a silver lining', but sometimes it seems like the media in B.C. thinks that clouds are actually made of pure silver. The fact is, sooner or later we'll see the impacts of a U.S./global slowdown here in B.C.

For example: Canfor closing two mills in Fort Nelson, B.C. ... "The PolarBoard oriented strand board mill and the Tackama plywood mill are closing indefinitely, with the firm blaming poor wood product markets"

Oh Yeah, The Transit Plan

My previous post talked about some of the numbers, but didn't address the details of actual transit plan (what little detail there is on it, anyway). I was going to write a post on this, but instead will advise you to read Sacha's excellent summary, I have little to add and few points of disagreement (although I am somewhat more optimistic about the impact on greenhouse gases from building more transit).

As an aside: He's right about the new American Gladiators stinking as well (Update: By 'as well' I mean about Sacha being right on both counts, I'm not implying that the transit plan stinks (as well) - both Sacha and I are generally in favour and want it to proceed post haste. The plan - not American Gladiators, that is. Hmm, I suppose this is why they say you should stick to one topic per blog post. Anyway, short version: Transit Plan good, New American Gladiators bad, me and Sacha in agreement (for the most part) End Update.)

The little I do have to add on the topic of transit is that after visiting Hong Kong, I am keen to see Vancouver employ a 'smart card' approach (like the 'Octopus Card' used in Hong Kong, or the "oyster card used in London). A smart card could replace both monthly passes and the Translink tickets. Equipped with RFID chips you would only have to have your card in the general area (like the pass most people have for office jobs) rather than swiping or inserting and trying to get the direction right and so on. It could also be used to implement a smarter distance based pricing so that, for example, you didn't need to pay for a whole two-zone pass because you worked on one side of a fare boundary and lived on the other (e.g. live at Joyce and work at Metrotown, a likely combination). Plus, if the card gained widespread acceptance it could be used at stores as well, not just for transit. Recharging it over the internet (as mentioned in the transit plan) would be easier than going to the shop to buy a pass or little books of tickets.

Help for BNS Sufferers

Many people suffer from BNS. You just might have it yourself. If you work in the media, you almost certainly do. BNS stands for Big Number Syndrome and is a common affliction, especially for people who dislike dealing with complicated topics and/or numbers.

Today's transit 'announcement' from the B.C. government caused a typical outbreak of BNS. From a google news search on 'Vancouver transit':

"BC Unveils $14B transit plan"
"Canadian Province plans C$14bln transit expansion"
"British Columbia to Spend C$14 Billion on New Transit Lines" and
"B.C. Poised to Invest $10 Billion in transit"

Just to pick a few.

The source of the headlines was this press release, 'The Provincial Transit Plan' released by the government today and the accompanying plan.

Given this recent outbreak, it is worthwhile reviewing some common preventive measures to apply when you are at risk of BNS.


Rule 1. How much of the big number is actually new, and how much has already been announced and/or spent?

From the press release backgrounder,

"$11.1 billion in new funding is required from all partners."

So $2.9 billion was previously committed, which means the 'announcement' effectively announces $11.1 billion in new spending.


Rule 2. How much of the big number is actually being provided by the person making the announcement or been formally committed by anyone else mentioned.

From the backgrounder,

"Over the life of the plan from now until 2020, the Province is calling on the federal government for investments of $3.1 billion, TransLink for investments of $2.75 billion, and local governments for investments of $500 million along with supportive land use."

So that's $6.35B which the government has announced on behalf of other parties - none of whom have made any announcement or commitment of their own. Indeed, in the case of Translink, their only role in life is to provide transit so it's not clear what it means to call upon them for money for transit, they already contribute all their resources to transit.

At any rate, that leaves $4.75B in new money from the province being announced.


Rule 3. How many years are we talking about?

From the backgrounder, "Over the life of the plan from now until 2020..."

So we are talking about 13 years, meaning that the provincial government is talking about spending $365 million/year for the next 13 years on transit.

Some other advice for dealing with BNS aside from these three rules is a) to find out where the money is coming from (so far no word on any new taxes or levies to cover this plan) and b) to try and put the number in context. According to the text of Bill 43 which changed the governance of Translink (the transit authority for Metropolitan Vancouver), translink has an annual total revenue of $840 million, So we could summarize today's announcement as follows:

1. Government plans increase in transit spending equivalent to 40% of Translink's annual revenue.
2. Government will ask other levels of government for more money for transit as well.

You can see how these simple rules, applied diligently, can cut a scary and awe-inspiring single big number down to a more manageable and comprehensible size. And if you insist on seeing things in terms of a single big number, well there are many sufferers of BNS who nonetheless go on to live healthy, normal and (somewhat misinformed) lives, so I'm sure you'll be OK.

Now, don't get me wrong, I'm all for spending more money on transit, and if the provincial government is going to do that as it seems, then more power to them, let's just not carried away with the BS, I mean BNS.

Multi-Tasking

Here's today's purported wisdom from CAtO (i.e. Me): People can devote resources to more than one thing. For example, they may decide to do more cooking for themselves, and also decide to do more reading. People can also support more than one concept or idea. For example, they might support measures to fight poverty, and also support electoral reform. From the above premises, It follows that people can devote resources to more than one thing they support. For example, they might write a donation to the united way to fight poverty, and write a letter to the editor at a newspaper arguing in favour of electoral reform.

All seems pretty obvious, no?

And while this is true for people , it is even more true for organizations, such as government, which can draw upon the resources of many people.

So what is my point?

My point is that if people are discussing whether or not women should be allowed to compete in ski-jumping at the Olympics, and you argue that we shouldn't even be discussing this until women are free from severe oppression in the Middle East, you are an idiot.

Similarly, if people are discussing fighting global warming, and you argue that we shouldn't do anything until we have solved Africa's governance problems and eradicted poverty there, you are also an idiot.

In general, when you argue that people shouldn't talk about x because x is a distraction from problem y, odds are you are an idiot. I say 'odds are', because there are some situations where things really are (somewhat) mutually exclusive, and a focus on one area really does prevent/limit action on another, and it's true that individual people don't have unlimited resources but cases where there is really a constraint in action are rare enough, in my opinion, that I feel comfortable making the general statements above.

People do not get together and identify the most pressing issue facing the world (as if they could even agree), devote all resources and efforts to solving it and then move on to the second most pressing problem and solve it and so on. Arguing that we need to solve problem Y before we solve problem X is just a recipe for getting nowhere on either. The world just doesn't work that way.

Gary Lunn Should Resign

So let's keep track here.

December 2006: Wheat Board president Adrian Measner is fired for stating his opposition to Conservative government plans to privative the wheat board.

Then in September 2007, Chief Electoral Officer Marc Mayrand attacked by the Conservative government for following the law regarding voting while veiled.

And now we find out that in the recent uproar over the shutdown of the Nuclear reactor at Chalk River, Conservative Minister Gary Lunn sent the head of the Canada's Nuclear Safety Commission, Linda Keen, a letter threatening to fire her if she didn't break the law and allow a restart of the reactor even though it was in violation of the safety regulations.

So, looking at the two most recent cases, that's two of the most important civil servants in the country who the Conservatives have tried to bully into breaking the law to suit their wishes. If I had to pick any two people in the country I didn't want making decisions based on a fear of being fired for partisan reasons, I'd have to put the person in charge of fair elections and the person in charge of nuclear safety pretty much at the top of my list. Just what kind of country do the Conservatives want us to live in?

Update: Our Prime Minister thinks threatening to fire an independent safety officer for not breaking the law like you wanted them to is 'commendable behavior' i.e. Our Prime Minister is dishonest and has no respect for Canadian democratic traditions such as accountability, but then you knew that already if you've been paying attention.

2008 Looking Good

So. 2008. A leap year. I don’t know about you, but I get three paydays in February this year, which can only happen in a leap year, when the 1st of the month is the right day of the week and the right week of the biweekly schedule falls on the first day of the month as well (so 1 in 4 times 1 in 7 times 1 in 2, means this is a 1 in 56 year occurrence).

Anyways, I’m not sure if it’s just a reflection of what I’m looking at/looking for or not, but there sure seems to be a lot of doom and gloom in the media this year (even more than the usual, that is). With oil up at $100 a barrel (in USD), the US Dollar dropping, the US Housing mortgage in freefall, the global financial industry (in particular the US) facing a severe credit crunch and capital shortages, the Central banks taking unprecedented measures to keep markets operating, a global economy filled with bubbles and economies overdue for a recession, thieves stealing wires for their copper and catalytic converters for their platinum, food prices rising rapidly, the continued unwillingness to fight climate change, the ever growing world population, the return of pestilence from ebola to bedbugs, continued trouble in Iraq, Afghanistan and Pakistan, etc. etc. etc., there’s certainly lots of choice in what to worry about - and whether George Bush leaving office will be enough to offset all that is an open question.

On the plus side, other than the fairly immediate financial problems, most of the rest are reflective of long term problems which won't really start to affect us until years from now, so things shouldn't be too bad this year.