Canada's Housing Bubble

Mar 18, 2010  Froogle Scott & vreaa VREAA

The next couple of episodes of The Froogle Scott Chronicles will cover our major renovation. The renovation was a big, three-year chunk of our lives during which a lot happened — both good and bad — so wrestling that amount of material into shape is taking a bit of time. In the interim I thought I’d give readers a quick update about some interesting things I’ve noticed recently in our neighbourhood. Click to read Part 1, Part 2, Part 3, Part 4, Part 5

The first thing that caught my attention was that within days of completing my mid-February inventory of major renovations and new houses in the pocket of Grandview we live in, the inventory was already out of date. A couple of weeks ago, I heard the now-familiar bashing and crashing sounds of a demolition underway. A small one, a half block from our house, an old deck being ripped off the back of a 1920s or 1930s house to make way for a new addition, by the looks of it. A block farther on, the same story — another rear addition on a house of the same vintage. And a block in another direction, a huge, house-altering reno has just begun, judging by the two-storey-high scaffolding surrounding the entire house. I guess when you go to the effort of enumerating and categorizing things, you kind of assume they’ll stay still for a while. Well, I guess not.

However, the other thing of note is what’s going on with a cluster of four houses I mentioned in the previous episode:

I pass through a two-and-a-half block stretch where one house is being raised, another across the street is demolished and a new house is being built, and around the corner two houses are being totally transformed by the addition of second storeys.

All of these projects were underway at the same time, and at various points you could say they were at roughly similar stages of completion. Two of the projects have been complete for a couple of months now, and the houses are occupied. But the other two appear to be stopped dead, within 80% or more of completion. The houses — one new, and one a major reno including a second-storey addition — have windows and doors in place, stucco and exterior trim applied, and with the exception of an exterior paint job, appear complete on the outside. Looking through the curtainless windows, I can see the interiors have all the drywall in place. But there has been no significant new work for weeks. It’s not a case of the finish carpenters, and flooring and tile and kitchen and bathroom trades, going in and out. These places appear stalled, and locked up. I might not have noticed so soon if not for the fact that one of these houses was definitely stalled for months during the economic collapse of 2008, and into 2009. It got to the point of being sheathed with plywood and covered with black building paper, and then nothing. It sat through an entire winter, and longer, while the rain and wind tore at the paper, stripping portions of it and exposing the bare plywood. When work recommenced, the first job for the crew was re-doing the building paper.

There could be any number of explanations for what’s going on with these two projects, but the one that springs most immediately to mind is that the owners have cash flow problems. I don’t think most people would voluntarily choose to leave a nearly complete single family dwelling in a central Vancouver neighbourhood just sitting empty. How much money are the owners losing, daily, by doing this? Carrying charges on a construction loan or line of credit, rent to live elsewhere. It doesn’t make sense. If their finances are like the finances of most people living in this neighbourhood, they have some money, but not money to burn.

I know the shocking speed at which our renovation ate through what we thought was a fairly good pile of credit. About ten grand a week for a three-man crew and materials, with various trades popping in and out to do their piece. And both of these projects are quite a bit more extensive than ours. It’ll be interesting to see what happens with these two places — I’ll keep readers of VREAA informed.

Vancouver real estate appears to be giving mixed signals at the moment, at least in our little patch of paradise.