How Did We Get Into This Mess?!
I may not be a fortuneteller, but if you’re reading this blog I’ll bet that I know what you’re thinking right now. How did we get here? How did a once sleepy little city morph into the second most expensive housing market on planet Earth?
In an article posted on the Global news website in February, they posited that The Real Estate Board of Greater Vancouver may in fact be the best source of historical home price data around. With their monthly reports dating back almost 40 years, the data shows an alarming truth; as Global put forth, “the average price of a single-family detached home in the Greater Vancouver area has increased as much in five months as it did from 1981 to 2005.”
Okay, so that’s where we’re at. But what I want to know is where have we been.
In an article authored by two UBC professors titled Booms, Busts & Bubbles and dating all the way back to 2005, they speak of talk of “a bubble;” which seems almost comical now to those of us living here. Their article goes on to note that over the last quarter century, Vancouver has seen 3 distinct cycles in its housing prices.
- 1979 to 1981. During this short, two-year period, the real price of a house in Vancouver ballooned by 119%
- 1986 to 1990. This period saw the real price of a home in Vancouver increase by 69%. Followed by a sharp decline, the third cycle began four years later, in 1994.
- 1990 to 1994…and then 2001. After this sharp decline, prices inflated again by 38% in the third cycle to the end of 1994, then spilled by 24% through the third quarter of 2001.
A YALE FINANCIAL ECONOMIST SPEAKS
One of the most interesting things I gleaned about the housing history of Vancouver came from this same article, when the UBC Profs cited Yale financial economist Robert Shiller. An American Nobel Laureate and economist, Shiller predicted the 2000 collapse of the tech stock boom. In this 2005 article, he was quoted as stating that the current state of housing markets in the U.S. was “the biggest national bubble that the U.S. has seen in over a century.” Not only that, manyyears prior Shiller “identified Vancouver as the ‘most bubbly city in the world.’”
Apparently in Shiller’s world, hindsight really is 20/20.
Though it seems I’m channeling my inner Mean Girl, I couldn’t help but balk at one or two of the statements made in this piece; especially after they had already pointed out Shiller’s timely predictions. In it they went on to note that, “Just because a location is attractive and growing does not preclude prices from falling. This may seem obvious to many people, but it is apparently not obvious to everyone.
To follow up on this, I had a look online at what Shiller was saying these days. In this YouTube video, he says, among other things, that the volatility of the Vancouver housing market reminds him of California, that while the U.S. had a bubble “burst” Canada has just continued to grow, Vancouver is worse than San Francisco, and Vancouver will double for inflation in 22 years.
I wonder now, writing this, if someone will look back in ten or twenty years time and reference some of my predictions for the Vancouver housing market in the same way? And while I have no way of knowing if anything I’ve anticipated will come to fruition, it’s kind of nice knowing we’re making history right here and now.