"The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops." So warns a recent story in adding "never before have real house prices risen so fast, for so long, in so many countries". Between 1997 and 2005 real estate prices rose 47 per cent in Canada and 73 per cent in the U.S.
In the U.S, many cities are now experiencing a real estate slide.
How worried should we be in B.C., where home prices keep climbing? Many take their cue from "condo king" Bob Rennie of Rennie Marketing Systems. But Rennie's leading rival may be a secret blogger with a darker reading of the trends. The figure behind the Vancouver Housing Market Blog () says thousands visit his site daily to read his predictions.
As anxiety mounts in the real estate biz and homebuyers pray for a dip in prices, VHB traffic has grown. And with each new hit, the blogger, who insists on anonymity, moves closer to becoming a soothsayer celebrity.
Bob Rennie is a Vancouver-based real estate mogul who pioneered the concept of the presale: selling condos before they were built. In January 2005, the Vancouver Sun reported that Rennie sold over $405 million dollars worth of property.
By contrast, the VHB "blogger" says he spends half an hour a day on the blog, and doesn't run any ads or make any money from it. "I own no property. My net worth is well into the six digits, however, so I don't fall into the 'poor little bitter renter' category. I could buy, but I choose not to,'" he told . He claims his blog gets over 25,000 unique visits a week.
Rennie and the blogger disagree as to whether we're in a "bubble": a market condition in which real estate values rise, through speculation, to more than what people are willing and able to pay. Pricing is related to interest rates (which affects the cost of the mortgage), the strength of the economy, job market and salaries (people's ability to pay), and how many people need housing. A "bubble" implies that a crash of some sort is inevitable.
The question in Vancouver and beyond is whether prices now have risen too high - and will fall. The VHB blogger posts daily entries and links to reports and news stories that counter believers in a bull market. He was only too happy to report, in April of 2005, that Yale economist Robert Shiller called Vancouver "the most bubbly city in the world."
As for Bob Rennie? The quote at the top of the VHB is by Rennie: "If the blogger is right...1,000 people are wrong." Rennie is regularly tells the media the real estate market will stay strong. (made two appointments to talk to Rennie, and he didn't show up for either.)
Back to the blogger. A typical VHB entry is the one for Thursday, Nov. 2, citing the Real Estate Board of Greater Vancouver's calculation that listings for Greater Vancouver houses are up 19 per cent from last year. (People who argue we are in a bubble market look for rises in the number of properties on the market -- they say that occurs when fewer people are willing to buy.) He goes on to report that in October, for the ninth straight month, sales were worse than in 2005: condo sales are down 19.5 per cent and condo listings are up 29 per cent year on year. Commenters on the VHB often seem more certain of an imminent crash than is the blogger himself. And they are more vehement in their criticism of most coverage of the real estate market. But that's one of the reasons the VHB started the blog in March 2005.
"The mainstream media," he said, "doesn't point out the inherent conflict of interest in always asking builders, bankers, developers and realtors about the housing market."
Pampering the prospectors?
Michael Levy, the business analyst for the Corus Radio Network, says "bull" market believers are running on feel-good faith. "It's a self-promoting philosophy that this will go on forever so people like to hear it will go on forever. They like stories that reinforce their feelings," said Levy.
Levy agrees with VHB that the U.S. real estate market is a bubble in many places. Here, he says, it's more of a "balloon" than a bubble. "You can let the air out of a balloon slowly. You can't let the air out of a bubble -- it pops." Levy says he's looking for a levelling off and a "correction" down, which could be "reasonably significant."
UBC professor Tsur Somerville, who specializes in real estate, expects prices to stabilize with possibly no increases for several years. "Now the party is winding down." But he says in order for there to be a crash, there would need to be employment falling, interest rates rising, or a huge inventory of unsold units.
More optimistic predictions need to be taken in context, says Somerville, noting, "Bob Rennie has a commercial interest."
That said, the VHB is not without its problems. Somerville says the blogger clearly is knowledgeable, but like all blogs, the VHB "flogs" his opinions. "That's the nature of blogs. You get unedited enthusiasm for a topic."
The blogger admits, "Sometimes the comments in the blog can veer too far into the 'doom and gloom' range."
But Somerville sees that pessimism about a reckoning as key to the blog's appeal. "In real estate, people are making lots of money without doing anything bragging about how brilliant they are. Well, they're not. They're just riding a wave. It's schadenfreude."
