(Warning: This will be a long thread, grab a cuppa coffee)

Most people are familiar with Warren Buffet's saying "Only when the tide goes out do you discover who's been swimming naked."

I believe it may be EXACTLY what lies beneath the
2/ level of the tide that could be the final nail in the #Vanre mkt once the full effect of foreign owners (FLIPPERS) selling their West Side SFD's kicks in. Considering that we are already 35% off the peak mkt highs, that in itself is an ominous thought.

Now, I've always
3/ suspected (no proof) that MANY #Vanre home owners have dipped into the "equity lottery winnings" that they have realized in the past 10 years to fund who knows what.

So when I saw an article yesterday from @BetterDwelling about Cdn Helocs,

4/ and saw the charts within the article, it got me thinking... "I've seen that pattern somewhere else." Ah yes, the West Side #Vanre Detached Market chart looks very similar... up to a point.

Take a look at the two charts below.

The fist is the "Price per Sq Ft for West Side
5/ Detached" from the beginning of 2008 to the end of 2018.

The second is from the BetterDwelling article and show "Personal Loans Secured With Residential Real Estate in Canada" from the beginning of 2012 to the beginning of 2019. (I am sure that if we had a similar chart
6/ for West Side #Vanre it would look similar in shape, if not steeper!)

Not surprisingly, as prices rise, so does the amount of loans secured by real estate.

Also not surprising is that as prices peaked in 2016/2017 and have cratered since, the amount of loans outstanding has
7/ CONTINUED to rise, or at least certainly did NOT fall.

That money is likely spent and gone.

In other words, the amount of loans secured by real estate WILL NOT FALL until forced by bankruptcy and the liquidation of the assets securing them.

As anecdotal "proof" of my
8/ suspicions, I saw a tweet today from @SteveSaretsky that is certainly telling.

He writes about a #Vancouver teacher who bought a $700,000 home in 2002 which then proceeded to inflate to a value of $3.5M I'm going to assume this home is on the West Side as East Side homes
9/ did not see that type of appreciation.

At this point in time, they have a total of 4 MORTGAGES on the home TOTALLING $3.37M!!!

Now this may be an extreme example, but how many other #Vanre homeowners are in similar, if not less precarious financial situations?

Might they
10/ be inclined to SELL their home if they fear that it's value might dip below what they now owe, never to see that value again for a loooooong time?

Add to that "crowd" the following type of West Side homeowner.

I also suspect that there are a second group who have followed
11/ a different, but perhaps equally precarious financial path due to their sudden "wealth" from the parabolic rise in the value of their home.

Let's say that teacher (not a great example because teacher's have great pensions) had not leveraged up her/his home, but figured,
12/ why save ANYTHING for retirement when I've got $2.8M in home equity, that surely will continue to grow, that I can cash in on when it's time to retire.

In the meantime let's live it up. Beemers and Range Rovers, and multiple trips per year and... don't worry our house will
13/ "save" us.

Well, that $3.5M house (peak value) is now worth $2.275M


That $2.8M retirement nest egg is now $1.575M… and falling.

If/when this market continues DOWN, there will be a "holy shit honey" moment where they panic and try desperately to sell their home
14/ to preserve what is left of their "retirement" fund.


ie. MANY West Side #Vanre homeowners have borrowed against their swimsuits, or simply sold their swimsuits figuring this tide will NEVER go out.

Now they are naked
15/ (and praying)

And WHEN we reach the panic stage of this collapse is when we will see these two types of local owners/sellers start pouring
16/ gas on the fire as they try and dump their homes to avoid bankruptcy in the first case, and to save their retirement fund in the second.

Thanks for reading!

#vanre #tore #vancouverrealestate #torontore #yjjre #westvanre #northvanre #richmondre #burnabyre #vanpoli #bcpoli
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