[Winsor_Pilates]

Originally Posted by cmyden

Yes, but the values in NY or SF only deflated by a lesser percentage than say, Phoenix or Las Vegas, because the values bubbled by a lesser percentage as well.

Did they? If Vancouver is the most "bubbled" city in Canada, wouldn't NY be the same for the US?

Atlanta fell about 8%, compared to around 38% for San Francisco, and I don't think anyone would point to Atlanta's high desirability or lack of land as reasons they didn't fall further than other U.S. cities. Same goes for Charlotte, Dallas, and other cities that didn't bubble up from their fundamentals as dramatically as the rest.
However, the correlation between how far the values fell (percentage wise) with how far they got away from their fundamental values (price to income for example, or price to rent) is very strong.

I'm not disagreeing that getting away from fundamentals is correlated to length to fall; that seems pretty obvious in any economic situation.
However, I do think that's over simplifying things and every city and even parts within cities have other factors that can hold them up from falling as much or lead them to fall faster.
That's why I think Vancouver didn't fall as much as Calgary did, and why it rebounded so strong. If it was as simple as looking at price to income, Vancouver would have crashed much more than anywhere in Canada in 2008.

The 'desirability factor' and the fact that a city has a higher density is already priced into the market in either direction. So it just doesn't seem to make for a valid argument regarding a bubble deflating slower, faster, or not at all if one does believe there is a bubble to deflate.

Don't understand what you're saying here, clarify?
If desirability is already priced into the market, than how is there a bubble? Wouldn't that make the "bubble" just the market value of desirability? Maybe I'm misunderstanding what you wrote here.
And I don't believe in bubbles, I believe in ups and down, and the speed up and slow down of markets.

But wouldn't this higher demand for housing not also lead to higher rent prices? Which would then keep the price-to-rent-ratio on an even keel, rather than skyrocketing?

Rent prices in Vancouver are ridiculous and have increased, but I agree the ratio is out of whack which is why I think prices will go down.

I guess that's just where I disagree. From what history has seemed to prove time and again with markets that have bubbled, the only real predictor of how far they drop is how far they got away from their underlying fundamentals in the first place. In that regards, Vancouver is truly in a league of it's own.

So what about 2008? Vancouver, and specifically the higher demand inner city areas of Vancouver that are most inflated barely dropped at all. My condo on Kits hardly fluctuated.
I don't disagree with your look at fundamentals at all, and think Vancouver has major issues here, but I think you're over simplifying things.
I would consider a cites desirability, location, available land, foreign investment and immigration to be fundamentals in Real Estate values as well. A couple of ratios and pie charts don't tell the whole picture.

By your logic, when this "bubble" bursts, will Vancouver prices drop below Calgary? because we're much further away from the fundamentals you list, and a drop based on only that would put us lower than Calgary.