A New Housing Bubble?

Featuring Nick Halaris

A decade after the last crisis, is another housing bubble brewing in North America? Los Angeles-based real estate investor Nick Halaris travels to two of the continent’s hottest markets – Vancouver and Seattle – to find out. By speaking to many different types of people at the center of those markets, Nick develops a 360-degree view of both cities. This allows him to draw his conclusion –and to leave viewers with an even more important question. Filmed from February 4th to March 6th, 2018.

Published on
26 March, 2018
Topic
Valuation, Credit Market, Housing Market
Duration
32 minutes
Asset class
Real Estate
Rating
86

Comments

  • EL

    Emanuel L.

    30 4 2018 20:15

    1       0

    Nick asked a lot of good questions but IMO stopped short of getting to the heart of the matter. He investigated two interesting markets asking wether they were in a bubble. What he didn't include was the question, what was likely to make the bubbles pop - how is a raise in interest rate or a recession going to affect the marginal buyer, or the market as a whole? You know there was a bubble only the moment it pops.

  • DS

    David S.

    8 4 2018 22:19

    3       0

    12:40 the ex greek finance minister now works for TD and talks about Vancouver real estate?

  • EK

    Emil K.

    6 4 2018 18:22

    0       0

    Nick Halaris was a natural. Please tell me that you have more content to show us in the future from Nick's last meeting in Los Angeles. That meeting looked to be a potential fountain of knowledge.

  • JM

    Justin M.

    2 4 2018 22:54

    3       0

    I thought this was a great piece. Nick did a good job of selecting people to interview; both showing the interviewee's knowledge in some cases, and the interviewee's naivetee in others. I would like to see this become a regular segment and/or hear from other real estate investors with boots on the ground in different markets. Great job.

  • WB

    Wes B.

    2 4 2018 14:07

    5       0

    Seattle is apparently a bargain relative to Vancouver. I would like to have seen a chart of avg housing price overlayed against avg annual income. Seem that would be make it rather easy to see where the bubbles are. Good work. It would be interesting to see more of this story using different cities.

  • ML

    M L.

    1 4 2018 16:18

    3       0

    Flipping where the initial deposit purchaser is on the hook if the 'flipee' doesn't progress to completion is new to me. In the UK, for e.g., once flipped, the contract is 'exchanged' and the 'flipee' is on the hook if s/he doesn't progress to completion - i.e. they lose their deposit.

    Seems like Canada-style flipping is a very risky proposition in comparison, as risk is not transferred.

  • AK

    Anton K.

    1 4 2018 04:52

    2       1

    You should upload this video to YouTube and title it ... "Real Vision Field Research - The Stupidity of the Human Race"

  • DG

    David G.

    1 4 2018 00:23

    1       0

    Vancouver is an epic bubble of historic proportions driven primarily by Chinese looking for a place to park cash outside their home country. In the last 1.5 yrs Seattle has been Vancouver'ed with mostly Chinese buying 1000-1500 sq ft safe deposit boxes in the city.

  • yd

    yon d.

    31 3 2018 21:40

    0       0

    Thank you Real Vision for another great production. As a Canadian resident, I can share with your audience that Vancouver has been in a bubble for 10+ years, not just the past couple. And, I liked the candour of the Seattle real estate agent in regards to Chinese money. One way to help curb the madness is to increase the tax (or prohibit altogether) non-residence from owning property. Oh! And stop the ZIRP/NIRP interest rates for gosh sake!

  • TK

    Thomas K.

    31 3 2018 18:42

    5       0

    Thanks RVTV. More videos addressing real estate please.

  • JL

    John L.

    30 3 2018 01:12

    0       0

    Seattle seams like a bargain comp with Vancouver or Silicon valley

  • KB

    Kirk B.

    29 3 2018 19:11

    8       0

    Thanks Real Vision for offering a video regarding real estate. You have been doing a great job providing insight into equity, fixed income, and commodity (particularly gold) markets, but have provided very little regarding the other major investment asset: real estate. In that context, the video with Nick Halaris about the Vancouver and Seattle housing markets was interesting and much appreciated; however, thls video focused on two extraordinary housing markets in which demand has spiked far beyond constrained supplies due to unique demand drivers of foreign buyers and mega tech firms. I would encourage Real Vision to expand its coverage of real estate markets and investments to include a other real estate markets and featuring videos of managers with lengthy experience investing in real estate assets.

  • AH

    Andreas H.

    29 3 2018 16:13

    1       1

    two very extreme city examples, if they are in a bubble, its a local bubble!

  • GS

    Greg S.

    29 3 2018 01:41

    0       0

    Mortgage delinquencies ticked up in the U.S. for the first time all cycle.

  • TT

    Tokyo T.

    28 3 2018 10:30

    11       0

    Copy and paste this video to Australia. Basically the same situation and market. When I fly home to Australia, every cafe, restaurant or other public place is full of some clown talking property. I always say, what's so special about Aussie houses? It's a roof and land right? The believers say "Australian" homes are "special." Bubbles can go for decades when governments support them, so shorting property is not as easy as it sounds.

  • Kv

    Kristian v.

    28 3 2018 06:55

    4       0

    BTW that Seattle home for $500k would be $1.5 million in Vancouver. $500k would buy you 480 sqft condo in a 50 year old building. No land.

  • Kv

    Kristian v.

    28 3 2018 06:48

    11       1

    Too early to speculate on whether there is a real estate bubble in Vancouver?!? Are you kidding me? This town is completely obsessed with real estate… its all anyone talks about. Everyone and their dog is leveraged to their eyeballs to get in on the speculative mania. Debt levels are off the charts. Every indicator is flashing red. Christ, the price of 650 sqft condos are at 10x median income. Detached homes are running 30x median income. If that’s not a massive bubble then what is?

  • JY

    JUNYI Y.

    28 3 2018 06:44

    3       3

    As long as Canada keeps welcoming foreigners, property value of places like Vancouver and Toronto will keep appreciating unless there is a big political sea-change. Just like China, they have been enjoying a tremendous property value appreciation for more than a decade. Putting cultural aspects aside, loose fiscal policies and 'Demographic Dividend' are really the driver of this phenomenon. Recently, local governments try to put a break on lending side by requesting a significant amount of increase on down-payment. Thus, housing markets in relatively developed areas of China finally show signs of exhaustion since 08-09. Most of developers even stopped sales for a couple months in order to preserve property value. Still, people on streets are talking about purchasing houses either for investing or for actually living. For now, rich immigrants will continue to drive up prices in these popular cities like Vancouver and Toronto. It is that simple theory of demand and supply.

  • us

    ujjwal s.

    28 3 2018 04:33

    3       0

    Love to hear more about housing finance, who is driving and where the the money coming from, and how the projections would look like in rising interest rate or lowering of liquidity.

  • JL

    James L.

    28 3 2018 04:32

    10       0

    Great video; If there was any feedback, I'd have recommended interviewing a mtg broker at one of the 100+ Mortgage Investment Corps (MIC) in Vancouver that are doling out 10%+ loans to anyone who will have them, not to mention the pubcos Home Capital, or Equitable...The shadow subprime in Canada seems to go largely unnoticed probably because they are private lenders. The non-insured loan growth at the 6 large CDN banks has gone parabolic recently as the regulator (CMHC) tries to reduce the taxpayers liability to a potential housing crisis. Loan growth in Canada is off the charts!

  • NI

    Nate I.

    28 3 2018 02:04

    8       0

    Choosing Seattle and Vancouver was a bit contrived. Those markets are well known for their insane valuations - to the point of causing legislation to be enacted in Canada to cool things off a bit. While this video made for some good drama, I would have appreciated a broader perspective. What about Phoenix, Boise, Denver, Kansas City, ... ? Last I checked, there were houses in those cities.

  • SC

    Scott C.

    28 3 2018 01:13

    5       0

    Really enjoyed this one. My only complaint is that it wasn't long enough. Could have watched another hour on this topic.

  • HH

    Hector H.

    27 3 2018 23:19

    2       0

    How the money supply affects the Case–Shiller index?
    If the federal reserve increases the m0 (an it did) obviously the prices will go up, but perhaps the prices are going down in comparison with the money supply m1.

    Any one did the analysis?

  • MS

    Matt S.

    27 3 2018 18:37

    5       1

    Excellent piece! Real Vision been on fire recently.....

  • RA

    Robert A.

    27 3 2018 17:15

    9       1

    Excellent piece Curator Milton. Toronto is on fire as well. The Nashville and San Antonio environs are on fire in the US as well. I tried shorting a few of the major Canadian Banks as a play on the Bubble, and to the question of “How’d that work out” my answer is “not so well”. I’d like to see a piece on FNMA and FMAC with a little sunlight on the insanity there. Never quite cleaned that mess up in the last Crisis (not supposed to waste a crisis) and Franklin Raines never had to even consider a “claw back” of his 100 million. The reason for my interest in the Govt sponsored programs is that they represent just one more MACRO log on the fire of ultimate Tax increases and Money printing along with the under funded Public and Private pensions. Although we have seen a movie similar to this before, this time there is no one to bail out the Sovereigns (last time much of the debt was transferred from Private to Sovereign). Hate to be negative, but this sure seems to lead us back to Gold.

  • SW

    Steven W.

    27 3 2018 15:39

    3       1

    I'm seeing this in my market in Eugene, OR, I have been getting offers on some of my properties that are not even listed. We are experiencing a massive influx of people from Vancouver, Seattle, Portland, and California up and down the I5 corridor bidding up house prices. A few of my employee's are house shopping and are seeing houses with no modifications that sold a year or two ago selling at six figure premiums now.

    The story is the same, they are getting priced out of bubble markets and are relocating spreading the bubble to other areas. Contagion.

  • SA

    Sreenath A.

    27 3 2018 15:21

    9       0

    Great interviewer! Very unbiased and the interviewer did a good job of letting the interviewee come to logical conclusions although it may not be in their favor. The funny thing is that all the experts know its a bubble but wouldn't want to admit it. Why take the punch bowl when the party is still going on!

  • PN

    Philip N.

    27 3 2018 12:07

    2       0

    http://www.greaterfool.ca/

    Turner has been on the bubble side for quite a while.

  • PJ

    Peter J.

    27 3 2018 08:18

    21       5

    I found this disappointing. The title was a housing bubble in brewing in North America. The whole presentation then focused on two cities Vancouver and Seattle. Vancouver has been renowned worldwide for being in bubble territory along with Sydney Australia for at least a couple of years. Seattle appears to have specific features that are unique to its bubble development I.e. Amazon and Microsoft / Tech. Therefore, highly unrepresentative of North America. The scope was therefore far too narrow to be of any value when measuring the N. American market as a whole.

  • NS

    Nick S.

    27 3 2018 06:18

    6       2

    How about these apples? In 2016, U.S. nonbanks originated 53% of ALL mortgages (and 75% of all FHA and VA mortgages) - largely funded by warehouse lines of credit from commercial banks like Wells Fargo and Citibank. Oh, and by the way, 64% of the mortgages originated to black and Hispanic borrowers and 58% of the mortgages to borrowers living in low- or moderate-income tracts. In all likelihood nonbanks dominance in the market increased in 2017. As for 2018? Well, well well...Wells Fargo and Citibank are gracefully bowing out of the game in the headlines. But they are set to make a reappearance if the somewhat risky lines of credit they provided to nonbanks just so happen to experience a crisis of liquidity triggered by rising interest rates or dropping property prices...in which case the commercial banks holding the reigns of the warehouse lending could be first in line to reap the harvest of what for nonbanks would be rotten derivatives but for Wells Fargo and others would be the sweet fruits and just rewards of their hard labor. Apples.

  • DR

    Daniel R.

    27 3 2018 05:38

    2       0

    I couldn’t extend the analysis from two extreme markets to the rest of Canada or US. CASE shiller shows the macro and this video the unique situation in these two cities. Can I extend this to Detroit

  • NS

    Nick S.

    27 3 2018 04:48

    1       1
  • WP

    William P.

    27 3 2018 04:42

    4       3

    Not much new information.

  • DK

    D K.

    27 3 2018 00:07

    3       0

    (Cont’d) in AZ that’s much nicer for 35% less. What my kids will do one day? Who knows...

  • DK

    D K.

    27 3 2018 00:05

    2       0

    The last home I sold in the Seattle area is now “worth” almost 50% more per Zillow in 4 yrs. the one I will sell now will be “worth” almost 45% as well. It’s insane. I’ll replace it with a home in

  • ET

    Ed T.

    26 3 2018 22:55

    14       1

    Good piece.

    I have some experience in the Seattle market that I can share. I bought a 1928 craftsman bungalow in the Ballard neighborhood in 1996 for $169,500 and put about $30k into a small remodel of the upstairs. It is was a nothing special house that apparently many owners over the years had worked on because in numerous places some finishes weren't quite plumb and square, though the bones were good. I sold it for $430k in November of 2005, the first time people were lining up around the block to buy and I was living in Mexico.

    Today it is estimated by Zillow to be worth $882k, and it remains unchanged.

    I think for perspective it would be valuable to discuss some typical ratios for home market valuations, like median home price to median income. According to my research a housing market is considered affordable and prices sustainable when home prices are about three times median household income. Anything over 5x is considered severely un-affordable. Seattle today is closer to 8.7x or 35% beyond severely un-affordable. Vancouver is 17.3x median household income, the most expensive city in North America. If that isn't a bubble, I don't know what is.

    At an 8.7 ratio, about 50% of household income is going to housing costs, when that figure shouldn't exceed 25%. There just isn't enough money to run the rest of your life when 50% of income is going toward putting a roof over your head. What about food, healthcare, your student and car loans etc.

    In my opinion, the ridiculously low cost of borrowed money is the culprit and the metric to watch here. The strong job market is already reflected in the price. Rising interest rates will, in my opinion, be a game changer. Prices are set at the margin. When that new buyer can't borrow enough to meet the market, prices ware going to come down and we may find ourselves right back in severe negative equity situations just like in 2010.

    Also from what I have read, even though mortgage underwriting and loan types aren't quite as loose and crazy as they were in bubble 1, the percentage amount of take home pay on average that homeowners are putting toward housing in most markets is higher today than it was in 2006. Buyer beware.

  • LK

    Lisa K.

    26 3 2018 21:58

    16       0

    I think he should mention that Canada has no mortgage interest deduct ion and no 30year fixed loans like in US. They have 5 yr adjustable over 25 years. Rarely are mortgage loans securitized.
    articles.latimes.com/2014/jan/16/business/la-fi-mh-canada-20140116/2

  • RM

    Ronnie M.

    26 3 2018 21:24

    4       1

    Real estate is a function of jobs and interest rates. At some point, central banks won't be able to keep interest rates this artificially low. Buyers now can "afford" more home due to incredibly low monthly payments and good job markets in tier 1 cities.

    The first thing to get impacted in real estate bubbles is volume. Sellers aren't willing to accept reality (of new lower prices) and after some time once they do, prices correct sharply. No doubt, mortgage credit has been much more conservative this time around, so perhaps we won't see such price deflation as in 2009. We are though starting to see some signs of weakness in luxury markets (ie, Hamptons, Manhattan).

  • DG

    Drew G.

    26 3 2018 21:08

    2       0

    What I want to see is major cities versus small towns that are consistent during the crash. The styles of living are much different and I would be curious if most of the wealth ends up going to people in smaller towns across the country if they play things right during crashes overall.

  • AL

    Andrew L.

    26 3 2018 20:42

    6       0

    When interest rates are not allowed to go to their intended level, everyone becomes a real estate investor.

  • JD

    Jeff D.

    26 3 2018 19:57

    26       0

    Very good. I am a millennial living on the central coast of California. My heart wants a bubble, because I want to buy into my town when homes go on-sale. However, my head thinks the next recession will have a new effect on the housing market. Read between the lines. Why are some locations exploding with people? Where the hell did all these people come from!? I took a month road trip last summer, across the USA, and what I saw opened my eyes. Most small towns across USA are empty and dead. There is a void of people and opportunities. Most towns I saw seemed to still be in a massive recession. I pity the property owners in those areas. The next recession will finish them off. You'll be able to buy entire towns for a million dollars, but why bother?
    I think the locations with opportunity, real jobs, good schools, safety, and good weather will never drop as low as they did in 2012. There will be a drop, and there will be cash buyers ready to buy and rent those properties out. Buying rental property in the next recession is an asymmetric bet. Providing the unfunded pensions don't tax property owners to death. Rents in the remaining nice locations in the USA will keep going up, as more and more people flee the dead zones.
    Buy gold now. Sell it in 3 years, and buy rental property.
    I think you guys should do a investigation into the prices of property in the rest of the USA. It might blow your minds. Thanks.

  • DS

    David S.

    26 3 2018 19:48

    7       1

    Glad to see RVTV trying to discover the interest of its viewers. I was also surprised to see the number of positive comments. It has sticker-shock appeal to viewers in many areas, but I stopped watching as it did not address any macro views that would influence my investment thinking. DLS

  • fT

    forecast T.

    26 3 2018 19:27

    3       1

    Long as you can scrounge up money together and let the market do its work! Wonder what % of that money is legal, without fraud or intention to commit fraud? Hmm..that'll define the bubbles apex - line crosses through fraud ,speculation , investment.

  • BA

    Brian A.

    26 3 2018 18:06

    11       1

    Great video!

    I live in Toronto, ground zero if you will, and I can make the following observations.

    First, as Nick pointed out in this video there is a lot of home/buyers equity in this housing market that’s traditionally missing in a typical credit induced bubbles in any asset class. As a matter of fact, and over a period of the last few years OSFI, Canada’s financial regulator, has been placing ever more stringent mortgage qualifying terms and conditions on potential buyers. Thereby raising even more equity from potential buyers and leaving traditional borrowers with more equity/security at the date of purchase and over-secured as real estate values trend higher. Not a traditional boom-bust scenario as financial history suggests.

    Second, urbanization and emigration is having a major impact on Canada’s major cities. Toronto has had net emigration of over 100,000 people a year for the last decade - at least, and with millennials currently moving from rural regions of Canada to highly urban Toronto, this trend is putting tremendous pressure on real estate prices and rental stock. (Our rental vacancy rate is almost zero.)

    Third, the data is in and the experts agree. Both cities, Vancouver and Toronto has a development supply issue not a housing bubble per se. A recent study noted 5 million empty beds per night in the Greater Toronto Area. This is a crazy statistic in a city with a so-called housing shortage. “Empty nesters” have large homes that children are leaving, many moving into condos in the downtown core, in neighborhoods where development is restricted or damn near impossible to develop. Also “empty nesters”, which I am one, would love to downsize but would like to stay in our own neighborhoods that many of us have spent decades or the majority of our lives. This type of development (small number of condo unit buildings or townhomes) is all but impossible to construct, under the current municipal development rules in established neighborhoods. So “empty nesters’” sit and do nothing, mainly because it’s the cheapest option, with restricted supply driving the values of their homes ever skyward.

    Millennials want the housing stock of the “Boomers”, “Empty Nesters’” to raise their own families. But the “Empty Nesters’”, in established neighborhoods are not leaving in the numbers sufficient enough to stop even spiraling real estate values for the millennials and other buyers at the margin. This is perhaps the crisis in the making, generational haves and have not’s, not housing prices per se.

    So in a nutshell, this housing bubble/crisis seems to be more an arbitrage on old outdated municipal construction bylaws, with NIMBY’ism, with a strong mix of demographics meeting growing populations than anything else. Yes, speculators and foreigners (Chinese nationals) can dart in-and-out doing this ‘arb’ and it has been successful; but one of these days’ hopefully municipal rules will bring supply/demand more in line with the market dynamics and those participating in it.

  • CB

    C B.

    26 3 2018 18:04

    6       0

    I am in my mid thirties, living in Phoenix AZ. It is interesting to observe many of my professional friends with two income households, desire their home to look like a magazine. Today, they are willing to take on debt in order to have an environment that gives the appearance of success/luxury. It seems as though my demographic cares more about appearing rich than actually being rich. I wonder if that psychology will change in the future? I think that the psychology will change, and that the change will be induced by a healthy dose of economic pain. Also, this segment with Nick highlighted in my mind the main driver of another housing dynamic that is in play right now: tiny houses, living in vehicles, living off grid, and other unorthodox household structures.

  • JC

    John C.

    26 3 2018 17:52

    9       0

    My God, what a crazy mess we're headed into yet again. Vancouver is still nuts from what I know and saw in this video despite the Chinese pulling back...how long can it take before this quasi house of cards starts to implode? So much seems to be based on flipping and 'getting out.'

    Price differences between Vancouver and Seattle are striking - sometimes 2-3x more for similar properties in seemingly similar neighborhoods - and this in a country (Canada) with higher taxes and VAT and thus less disposable income for homeowners (versus the US). And in addition the Seattle neighborhood in the video was up over 100% in the past few years as well (!).

    Would be interesting to see a follow up on Australia, New Zealand & Sweden (all part of the 'SCAANZ" overvalued RE markets).

    On another note, I guess the "Professional Dog Walker" along with the Uber drivers in these big cities tell you all you need to know about job growth there & how its geared towards the 1%-ers. These are the types of jobs we're creating in the US now I guess. Sigh.

    Thanks RV great video!

  • Jc

    Justin c.

    26 3 2018 17:15

    4       1

    Great piece. Good change-up on the style. It was nice to see someone say no bubble despite what would at first glance appear to be overwhelming evidence. He made a couple good points there at the end. There were a lot of valid opinions packed in that 30 minutes.

  • EF

    E F.

    26 3 2018 17:09

    3       0

    Coming from a dense city in Southern Europe I've always wondered how u get a bubble in a massive country where everyone owns a car

  • MG

    Mohamed G.

    26 3 2018 16:13

    5       10

    Honestly expected wayyy more on real estate. This was mediocre blurb we see on breakfast television. Seriously, people are flipping home! What’s new here?

  • TL

    Tom L.

    26 3 2018 15:38

    1       0

    Transcript?

  • AG

    Amir G.

    26 3 2018 14:40

    3       0

    Great video! Loved it. I’m a Canadian living in Toronto and I follow the real estate market closely. I wish they could also provide some insight on the east coast hot markets such as New York and Toronto. Hopefully in the future videos of this real estate big story series.

  • V!

    Volatimothy !.

    26 3 2018 14:36

    4       3

    Disappointed I didn't see San Francisco area given their homeless crisis. I think this crisis is partly the result of home prices. Google and Apple are in this area.

  • md

    mike d.

    26 3 2018 14:14

    26       0

    Well done. I am a small builder in Boston , this is the third real estate boom I have participated in. The first one ended around 1988 to 1990 and ended in a crash, I did not want to see it coming but it came. I wanted to shoot myself in the head. The next boom ended around 2007 but I saw this one coming a mile away. most people I talked to thought I was crazy. It was just like it is now, all of those interviews could have been recorded in 2004,5,6. Then that boom ended in a crash. Unless you were involved in these markets you cant believe how things change. I believe we are at another top and the crash that is coming will be worse then the last two, and the fed wont be able to print us out of this one. Good Luck

  • BG

    Bruno G.

    26 3 2018 14:05

    32       0

    Common sense. You have a crappie looking home selling for 7,000,000 dollars in Vancouver, I don’t care what anyone anylsis is .....that’s a bubble. What about Value? We will play this back at some point in the future and say WTF were we thinking. Don’t over analyze it.

  • DT

    Daniel T.

    26 3 2018 13:10

    16       1

    Thanks a lot, great work! Would be great if you could make a series out of it and review some more cities. VC and Seattle are known to be quite high up in the food chain, but other cities and even other countries would make for an interesting comparison in my opinion.

  • TS

    Todd S.

    26 3 2018 11:03

    11       1

    Great work !

  • PB

    Pieter B.

    26 3 2018 10:54

    26       1

    You did a fantastic job Nick! I really enjoyed this on the ground research and conclusions at the end! Thanks a lot!