November 8 Stats Update
Inventory for REBGV and FVREB attached and detached was 18,052, of which 5,322, or 29.48%, were over 90s; inventory is lower than last week, over 90s are higher. For the REBGV the numbers were 11,317, 3,145 and 27.79%; inventory is down,overs 90s up. For the FVREB the numbers were 6,735, 2,177 and 32.32%. All Valley numbers are higher than last week.
REBGV detached and attached numbers for last week were 971 new listings, 374 price changes, and 926 sales for a sell/list of 95.37%. Listings are down, sales and sell/list are all up.
11,317/(926*4.25) = 2.88 MOI. As you’d expect, with inventory down, listings down and sales up, MOI is also down. Same as last week.
FVREB detached and attached numbers for last week were 519 new listings, 237 price changes, and 338 sales for a sell/list of 65.13%. Listings are down, sales are down and sell/list is down.
6,735/(338 *4.25)= 4.69 MOI.
Combined detached and attached numbers for last week were 1,490 new listings, 611 price changes, and 1,264 sales. Sell/list was 84.83%. 18,052/(1,264*4.25) = 3.36 MOI. Listings are down, sales are up, and sell/list is down.
Last week I wrote that all numbers were right for higher prices. Was I right?
First chart is REBGV, second is the Valley, third is combined.
Rob’s Report Generator
Data for File: SalesNov082009REBGV.csv
| All Properties | |||||
|---|---|---|---|---|---|
| Sales | Average List Price of Sales | Average Sales Price | Difference ($) | Difference (%) | DOM |
| 926 | $629,206.97 | $611,824.58 | -$17,382.39 | -1.97% | 40 |
| Attached Properties | |||||
| Sales | Average List Price of Sales | Average Sales Price | Difference ($) | Difference (%) | DOM |
| 583 | $448,786.97 | $439,557.67 | -$9,229.31 | -1.72% | 38 |
| Detached Properties | |||||
| Sales | Average List Price of Sales | Average Sales Price | Difference ($) | Difference (%) | DOM |
| 335 | $929,363.73 | $898,708.78 | -$30,654.96 | -2.35% | 42 |
Data for File: SalesNov082009FVREB.csv
| All Properties | |||||
|---|---|---|---|---|---|
| Sales | Average List Price of Sales | Average Sales Price | Difference ($) | Difference (%) | DOM |
| 338 | $437,920.49 | $427,314.05 | -$10,606.44 | -2.74% | 56 |
| Attached Properties | |||||
| Sales | Average List Price of Sales | Average Sales Price | Difference ($) | Difference (%) | DOM |
| 122 | $293,715.57 | $285,335.66 | -$8,379.91 | -2.94% | 53 |
| Detached Properties | |||||
| Sales | Average List Price of Sales | Average Sales Price | Difference ($) | Difference (%) | DOM |
| 190 | $548,527.75 | $536,521.58 | -$12,006.17 | -2.48% | 57 |
Data for File: SalesNov082009REBGVFVREB.csv
| All Properties | |||||
|---|---|---|---|---|---|
| Sales | Average List Price of Sales | Average Sales Price | Difference ($) | Difference (%) | DOM |
| 1264 | $578,056.00 | $562,485.53 | -$15,570.47 | -2.18% | 44 |
| Attached Properties | |||||
| Sales | Average List Price of Sales | Average Sales Price | Difference ($) | Difference (%) | DOM |
| 705 | $421,951.92 | $412,869.60 | -$9,082.32 | -1.93% | 40 |
| Detached Properties | |||||
| Sales | Average List Price of Sales | Average Sales Price | Difference ($) | Difference (%) | DOM |
| 525 | $791,537.38 | $767,631.51 | -$23,905.87 | -2.39% | 48 |
55 comments
Thanks for the stats Rob!
Random observation –
The Obama administration is now giving out $6500 tax breaks to “move up” homebuyers.
This will provide support for prices at a higher level than pre-bubble years.
But it will also allow people to get moving around again. I gather that a lot of people are mortgage slaves — can’t move because they’re underwater, can’t move because they can’t get financing because they’re almost underwater, etc.
$6500 might not seem like much on the west coast, but I’m sure in the heartland where folks are probably moving from a $120K property to a $160K property it can make all the difference.
Smart move. A game-changing policy that will make minor improvements to economic stagnation on a couple fronts. And, of course, another chink in the defence of people who are doubted that government would stop short of restructuring the entire economy just to keep the invisible hand from hitting the “flush” lever.
What will Canada do next to buoy housing prices? I posted a laundry list at http://robchipman.net/blog/feedback post #48 & #50.
WBWUCR’t'13?
for the bears-
As an ardent bear myself, I have to admit I have capitulated. The biggest fact, in my opinion, is housing supply. The fact is that there is very little. The recession has, perversely, headed off the housing downturn. We were hoping for a ramp up in housing supply, which was happening, however, we did not see the complete collapse in new housing additions. Housing starts may well be near 40 year lows this year, meanwhile, international immigration has continued unabated. The market may slow, but an oversupply we will unlikely to see
Question for reformed bears — where are your assets nowadays?
**********
Since the world leaders seem dead set to raise the economy from the dead by asset inflation and cash giveaways, how have you adjusted your portfolio from a year ago? From 6 months ago?
I’ve been net neutral since my put options dried up in the spring/summer. Lately I’ve gone a bit long. And I’m tempted to just throw a bunch of cash in various securities since the gov’ts seem so dead set on asset inflation.
Anyone else?
* Alex-C, you were all about “asset preservation” 9 months ago, where are you now? Still comfy having them preserved? Or have you gone long and made a wad, or gone short and lost?
* romeo, you were long long long financials until my call of “a Canadian bank will fall by Nov 23, 2008″ and on that date all 5 banks lost 20% of their value and you said you were cutting your position. Did you get back in?
*WoW, you were always the bullishest of all on financials, commodities, and heartily ignored my prophesies of doom and gloom. You’ve certainly been vindicated, and I’ve been proven wrong. Are you raking in the gains from your positions, or did you not have the guts to follow your instinct?
and was it ex-banker that listed a TSX-traded ETF that wasdelivering 4% dividends — which was that again? And how much has it gone up since then and diluted the dividend to someone buying in now?
Any other thoughts from cash-heavy Bears In Waiting?
WBWUCR’t'13?
WhyBuy I’ve stuck with my positions, payoff has been massive (thx for asking).
My view on housing continues to be consistent and I think inflection point is at hand.
U?
cooling from the outside in?
Valley looks….cold – and lots of construction underway, I wonder how much of that sits empty for a time…and if so, what (if any) impact that has closer to the centre – any thoughts?
High purchase prices do put pressure on rents (we’ve seen it happen for years) because shelter is a necessity. One result is that we see less get rented for more, and we see more people living in less. That said, AC is absolutely correct – rent can’t be mortgaged, and ahs to be paid every month. Take it from a hard bitten rentman: a good economy and rinsing prices will force tenants to pay more, but a soft economy will result, long term, in more vacancies and lower asking rents. Right now I think its fair to say (based on what prospective tenants tell me) that there is a lot to choose from, but prices are crazy high. Owners aren’t capitulating (mind you, AC, some owners can’t capituplate, right? That’s a real stand-off).
Interesting points Rob – lots to choose from but owners not capitulating – I see a lot (lots) of places on craigslist that have not been rented for months, slightly lower asking prices, still there for the taking…i assume at some point the market takes rents higher or lower, if lower (due to lots of supply) these places will stay empty or join the move downward in asking rent price. interesting.
rob:
in the previous post you mentioned the lack of
a “landmaking machine”….. have you driven down Prior
street recently…. brownfields as far as the eye can see
you could cram 60K people into that area
two redevelopments applied for in the West End
……rentals no less… yet more re-purposed land
check out little mountain, again room for 10x
the population as was there…..
yup we are definitely “landlocked”
http://www.generationaldynamics.com/cgi-bin/D.PL?xct=gd.e070220
Government stimulus is very good at creating asset bubbles; however, its not so good at creating jobs.
Went for coffee yesterday morning in the West End; I noticed a lot of for rent signs and empty restaurants.
How about a paradym shift: take advantage of record low interest rates to pay down debt faster, not incure more— just a thought.
BS/8,
The brownfield lands along Prior are actually filled — there used to be waterfront right up towards Clark. It’s extremely expensive to build along here, and it’s not just because the fill is dubious. Rumour has it the tide comes into the basement of Main St. skytrain.
That said, there is lots of land available: the DTES, SEFC, and all kinds of underutilized industrial south of the port lands. I still think “running out of land” is a canard… Portland still crashed, didn’t it?
Treasuries: A cloud on the horizon
Allan Robinson: Globe and Mail
U.S. Treasury markets barely budged today ahead of this afternoon’s $40-billion (U.S.) auction of three-year notes, but the real action today and for most of this week will focus on long-term bonds……
Tomorrow there will be an auction of $25-billion in 10-year bonds……
On Thursday there will be an auction of $16-billion in 30-year U.S. Treasuries……
The yield on 10-year and 30-year U.S. Treasuries have climbed seven basis points and 14 points during the past five trading days, respectively, to 3.49 per cent and 4.4 per cent…….
There is also speculation that the U.S. Treasury will increase the duration of its portfolio by issuing more long-term bonds, which is likely to push long-term interest rates higher……
“But in the back of everyone’s mind is when will demand dry up and auctions fail?”…….
http://tinyurl.com/yjycsz5
Anonymous 7:
To clarify/repeat, I’m hearing prospective tenants comment that there’s lots to look at, but its all amazingly expensive. I compare that to my personal experience – I’m dropping some rents but its not anything like regular recession style reductions, and I’m not evicting very many people suffering from job loss (when you have to toss out several previously good tenant sbecause they’ve lost a job you know the economy’s suffering). That’s why I say we’re still in stand-off mode. As you point out – continuing vacancies but only slightly lower rents. 18 months ago I would have 10+ parties at a showing, and none would make a peep about condition or rent. Times have changed, but parties haven’t switched positions.
)
BS/Turkey:
Turkey’s right, that area was the end of False Creek in years gone by. To be honest, if I owned all of it I might be tempted to excavate some of the filled area and create even more waterfront (what’s more valuable, some flat land between 1st and Prior, or some more waterfront a la FC? I’m not sure what we’d do with Science World, but…
That said, I didn’t say we don’t have landmaking machines (we do) and I didn’t say that land shortage would maintain our current boom. Any long term price gains that come from land shortage will first have to catch up with price gains that came from the boom – in other words, if land shortages would ahve given us 6.5% annually, on average, instead of 4.5%-5%, well, we’ve already made up lots of that ground so we won’t see the effect so much. On the other hand, appreciation due to land shortage is much more real.
In regard to landmaking machines I think your argument disproves itself – we have the landmaking machines (highrises, Gastown loft rehabs, laneway housing, more condos) as a direct result of the land shortage. Your argument is kind of like saying “It doesn’t rain in Vancouver because we have raincoats to stop us from getting wet”. In other words, we’re dealing with the land shortage in lots of ways, but its the land shortage that makes us come up with the solutions. You can’t get away from that. If you want a three bedroom house on a 1/3 acre lot, and you don’t already have one, where do you go next? Maple Ridge is built out to 240th. Langley is getting full. Mission is planning development on the west side of town, but how long, really, until people commute to Vancouver on a train from a sfh in Deroche? 20 years? That’s land shortage, my freinds.
Another thing to consider: in the DNV in the early ’90s, staff came up with a great plan. They would subdivide Cove and Mountain Forest (the slopes of Seymour that you see from the 2nd Narrows) and sell the lots. The funds would pay for new infrastructure and upkeep of existing. The population saw (rightly or wrongly) the absolute idiocy of the plan. They literally marched on District Hall (I remember the night and the poor Commissionaire, a guy about 80, had to get TVs out to the overflow crowd so that they could see what was going on inside). Several political careers ended that night, and a few new ones (some still going) began. The result was the whole area was zoned Parks, Recreation and Open space, and the DNV was restricted to mostly infill and development of already approved lots.
What’s the effect? Well, look how far up the mountain we go in North Van, and how far up the mountain they go in, say, Westwood Plateau. What’s that done for prices?
Whybuy:
Do you think the $6500 and the extension of the $8000 is good for the US market?
” If you want a three bedroom house on a 1/3 acre lot,”
this is not the ideal housing solution,
in the face of increasingly expensive
fossil fuels and a severely affected climate
a double front drive “garagemahal” is almost
criminal
I don’t like the whole ‘land shortage’ concept because I think it misses the true cause. Firing up the landmaking machines is not due to a shortage of land, but is driven by a vibrant economy (and high incomes) in which workers will (and can) pay a premium to be nearer to the source of jobs. Once that premium becomes too high, businesses are driven to new areas where costs are lower (ie rents are lower and cheaper workers can be found), with geography playing a minor role. This is why I can’t envision commuting from Deroche will be widespread (even in 20 years), unless Vancouver transforms itself into a major world financial and business hub a la NY. What is more likely is regional centers increasing in size and importance (Surrey, Langley, Tri-Cities etc.) with people commuting within and between those centers.
Show me an area where there is a ’shortage of land’ that is used to justify price appreciation where there isn’t also a vibrant growing world class economy.
Blueskies – agree with you there. Estates that were once reserved for the wealthy and only became a McMansion option for the middle class during the current era of abundant and cheap fossil fuels will once again return to the domain of the rich for the reasons you mention.
The whole planet is running out of land in a sense, so you cannot argue against it. That said, Vancouver has massive amounts of underused land. First of all, there is the city itself, full of single families on massive lots. There are also parking lots all over the place, and parks and whatnot. I have never seen a major city with so much unused land. Then there is the Valley. The whole thing is essentially empty. Have you guys been out there recently. It’s nothing but empty fields with a few clusters of houses near the roads. Try driving for a half a day from the center of another city, with comparable like New York, London or Tokyo, then you will understand what a real land constraint looks like. Even Toronto present a radically different picture. One of the great charms of Vancouver is that there is essentially nobody living here.
WhyBuy/4… ‘HP’ is still in ‘capital preservation’ mode, all cash… disaggregated into CDIC backed cashable GIC’s at marginally better than published rates… am beginning to get ‘restless’ but no regrets as regards the recent run-up in capital markets (a sage once remarked, ‘The difference between the stock market and casinos is that casinos have rules’).
As regards the ‘BigPicture’, my focus – of late – has shifted from the macro-economic to the geo-political/public policy/social arenas with a special emphasis on the morphology of the American polity. In that respect, much will hinge on whether Obama decides to escalate in Afghanistan, the Senate/House enact genuine health care reform with a viable vs. token ‘public option’ and whether their macro-economic stimuli to date prove ‘adequate’ in the run-up to the 2010 mid-term elections. I am not hopeful.
In HP’s worst nightmares – BarryO profoundly disappoints the progressive movement who catapulted him into the WH… Disillusioned and disaffected, the movement progressives then sit out both the 2010 mid-terms and the 2012 presidential contest – enter Sarah Palin & Rush Limbaugh…
As regards the current ‘recovery’? My ‘gut instinct’ is that it is but a brief/illusory interregnum… but that isn’t terribly scientific, so let me put it another way – if continued high-unemployment persists (and I’m afraid it may already be ’structurally’ locked in) we’re in for a world of trouble/hurt…
On the bright side, as regards the future ‘nobody knows anything’ – so let’s hope I’m wrong…
Following are an assortment of think pieces culled from the last 48 hours or so of the media cycle which may enlighten…
http://tinyurl.com/yh7rrod
http://tinyurl.com/yjpw37t
http://tinyurl.com/yjw23rx
http://tinyurl.com/yenhfmo
HP, what are your thoughts (short and medium) on the Vancouver housing price debate?
“The whole planet is running out of land in a sense, so you cannot argue against it.”
Of course that’s true, since it’s been running out since the first stone bungalow was erected in Fred Flinstone’s time, but it’s not really relevant to the discussion. Just like we’ve been running out of gold since the first ounce was dug out of the ground and we’ve been running out of oil since the first well started gushing in Pennsylvania. But price is driven by scarcity, not by it’s ‘finiteness’.
Land ‘constraints’ in NY, London and Tokyo are not driven by geography but by huge growing economies with many high paying jobs in which it makes economic sense to densify and people are able to pay a premium for it. I don’t believe Vancouver falls in that catgory.
Canada job loses in 2009:
-129000 January
-79,600 February
-82000 March
-61300 April
-41,800 May
-7400 June
-45,000 July
+27,000 August
+31,000 September
-43,200 Oct.
I think I got the numbers right, but I may have error. Anyhow, the picture does not have a lot of greens in it – lets hope for the best – that Oct job losses are just a blip.
no matter whats the outcome – I agree with most of the folks – this is not over at all.
on a brighter note:
the couple who won $50 million in Manitoba can
now afford a down payment on housing in YVR…….
how cool is that?!
Blueskies/Purp:
I say ” If you want a three bedroom house on a 1/3 acre lot, and you don’t already have one, where do you go next?”
and you, BS, answer ” a double front drive “garagemahal” is almost
criminal”
and Purp answers ” I can’t envision commuting from Deroche will be widespread (even in 20 years)” .
You might consider the demand to be politically incorrect, not to your taste, or not in synch with “our common values”, but the facts speak for themselves: 20 years ago we weren’t building on Sumas Mountain or the mountains south of Chilliwack. We hadn’t filled 200th from the highway to Langley City with SFHs. Maple Ridge subdivisions hadn’t reached 232nd.
20 years ago we didn ‘t envision needing a doubled Port Mann or people commuting from Mission. Now we have a WestCoast Express to help them do exactly that.
A sizable portion of the market wants SFH. Sometimes its because that housing is close to where they work (I just sold someone a house in Mission 5 minutes from their new job at a commercial site that wasn’t in Mission 20 years ago), and sometimes it involves commuting. Not everyone wants to live downtown in a condo so that they can ride a bike to work. Some people, in other words, don’t like what you like or think what you think. They’re going to keep wanting SFHs, and they need land for it. The demand is clearly here, now, and its not going away.
The question, therefore, remains:
” If you want a three bedroom house on a 1/3 acre lot, and you don’t already have one, where do you go next?”
Newcomer:
“there is the city itself, full of single families on massive lots. There are also parking lots all over the place, and parks and whatnot. I have never seen a major city with so much unused land. Then there is the Valley. The whole thing is essentially empty. Have you guys been out there recently. It’s nothing but empty fields with a few clusters of houses near the roads”.
Your handle is apt!
First things first – zoning laws have a major impact on scarcity. City lots (which you consider large, but are generally smaller than suburban lots) can’t be densified without zoning changes (i.e., laneway housing). Builders would build monster houses to fit in even more people if they were allowed. We’ve seent he monster house woars before.
The Valley is empty? All I can say is that you should have seen it before, and, there’s a little thing called the ALR.
Bottom line, land scarcity won’t maintain bubble/boom values, but moves toward densification, the need to expand traffic/transit infrastucture, zoning relaxation and a whole raft of other things point toward the fac that land in the Lower Mainland is scarce relative to demand.
HP:
Obama has to get it together to avoid becoming the next Jimmy Carter. Sarah Palin as the next Reagan? If that came to pass you have to look on the bright side – Tina Fey is back, baby!
Vancouver is a puny city in comparison to meduim sized cities. We need to come down to earth and realize our place in the real world. Sure in the downtown we have the mountains and the ocean blah blah blah, We also have many lowrise apartments that if need be can be torn down and build highrise apts. All that is holding us back is the zoning which is nothing that money can’t take care of. You may not be able to beat city hall but you have always been able to buy it. And in the country if we need it there are thousands of acres in the ALR that can be released if need be as well. In Vancouver we have no shortage of land as of yet not by a long shot. You want to see how land can be utilized have a look at Hong Kong. We will always have plenty of land to sell rich immigrants condos for a very long time. Don’t listen to that BS.
Taiwan, population 23 million.. On an island about 1/2 the size of Vancouver island. Their apartments are actually cheaper (depending where you are on the island) just as depending on where you are in Vancouver. I don’t hear about or see real estate prices rapidly rising there because of land shortages.
Disbelief:
Its not that easy to change zoming. It has to conform to the OCP, and it has to make the electorate happy. The ALR isn’t going to be opened up easily (imagine the debate between greenies, proponents or the 100 mile diet and developers who want to build more McMansions.
The question remains – if you want a new built SFH on a good size lot, where do you have to go? I’m looking for a geographic place name you can find on a map, not an opinion on what demand should look like or on how crooked local government is or how they do it on the other side of the world.
diGitel:
I’m not saying you can’t do it. Clearly, if we tossed existing zoning laws out we’d be able to fit way more people in way less space. Zoning falsely inflates (and sometimes deflates) the value of land, and alwasys has. Usually the population is in favour of zoning. However, we can’t argue that zoning doesn’t exist here, or that its about to disappear, and so it is a very real contributor to the scarcity of land.
” but I’m sure in the heartland where folks are probably moving from a $120K property to a $160K property it can make all the difference.”
I doubt there are many people in the heartlands who are “mortgage slaves.” The foreclosures are almost entirely focused on a several cities, and the inner cities in those cities.
Further, as with the cash for clunkers, this temporary tax break on moving house will just soak up demand in the future, providing no net benefit.
And as for government still trying to subsidize an asset bubble that needs to be fully pricked, i think history speaks for itself.
“Taiwan, population 23 million.. On an island about 1/2 the size of Vancouver island. Their apartments are actually cheaper (depending where you are on the island) just as depending on where you are in Vancouver. ”
And in Singapore – just 30km by 20km and surrounded by water – I can buy a house for about $1 million.
My point is that we will be able to find all of our developmental requirements as needed. When money is no object you can always get what you want.
The answer to your very vague quesion is . If you have enough money you can have it any where you want.
Disbelief:
“When money is no object you can always get what you want”.
Fair enough. And that goes toward explaining why the North Shore has done so well and will continue to do so.
” The answer to your very vague quesion is . If you have enough money you can have it any where you want”.
Fair enough again (mind you, you’re not getting a sfh on the edge of Stanley Park or along False Creek, and I don’t care how much money you have – when politics hits money, politics wins) so I’ll re-phrase the question:
“Since there is lots of demand among average income earners for sfh, where are we going to get the land to satisfy that demand, if, as some contend, there isn’t a land shortage in the Lower Mainland?”
Funny you mention Stanley Park and that is what that Ho guy (harmony airways) guy wanted and he has a SFH in Stanley Park (close as you can get). Ho guy describes him very well as of late also. Proof that if you have enough money anything is possible.
Currently there is demand for SFH. As money tightens and this recession starts to really heat up in the lower mainland we will see lots of opportunities for people with cash. Credit that is very easily obtained now will be difficult if not impossible to get in the near future. There are way too many that are overspent and will be in huge trouble.
Disbelief:
So you’re saying that there is demand for SFHs currently, and that as money tightens up and the recession takes hold there will be lots of opportunities for people with cash.
So, you’re not saying that demand for SFHs will disappear, and you’re not saying where new SFHs will come from. How, exactly, does any sort of change in the credit market effect land supply? It just effects the way the land is sold, correct? If credit disappears, at least partially, won’t we see re-pricing? And couldn’t that lead to new buyers entering the market at lower price points and buying with cash? (A variation of that saw vultures in teh SW competing with FTBs for foreclosures).
Bottom line, you’re not talking about land supply, nor answering the question.
If credit disappears, at least partially, won’t we see re-pricing? And couldn’t that lead to new buyers entering the market at lower price points and buying with cash? (A variation of that saw vultures in teh SW competing with FTBs for foreclosures).
Sure, but where is the vulture bid? I have cash. I’m a vulture at some price myself. Nowhere near here though.
The vultures in Phoenix and Vegas started picking at the bones at 1/2 to 2/3 off. Call me when that happens.
Rob:
I’m hip to the zoning and the ALR, but for me those are nothing if not indicators of incredible under-utilization of land. They are sort of luxury problems that would disappear PDQ if the need were there, as Disbelief points out. I am not saying that the city is full of vacant lots. On the other hand, people routinely describe Vancouver as having a unique land shortage because of its position between the mountains and the US and that, is pure nonsense. In a hundred years time, maybe that will come into play, in the meantime, I think we can drop another fifty million or so into the space between those to bookends without any real trouble in terms of geographical space.
BTW, could you pick one of these two options, please:
1) Make the tags work.
2) Get rid of them since the effects are fictional.
new buyers entering the market at lower price points and buying with cash?
That’s what I said. There will always be a demand for all types of Real Estate at a price point that matches if not there is no sale.
I believe we will see some easing on the ALR and this is where these SFH will come from. Lots of it near the border in S Surrey and it is being eased a little more each year. In Richmond and also in Langley there are ample amounts. Again there is no shortage of land.
Oops.
http://www.cbc.ca/canada/british-columbia/story/2009/11/03/bc-olympic-rentals-slowing.html
Of course one would expect rentals to slow as we approach the event. That does not necessarily mean that the even won’t be well-attended, however. Think about it – most people who wanted to come have already got their tickets. Once they got their tickets, they’d be fools to leave booking their accommodation until 3 weeks before the games – wouldn’t you agree?
As for the specific house mentioned in that article – you’ve no idea where it is, where they advertised it, how appealing their advert was, etc, etc. Perhaps they didn’t take any photos of the interior, or didn’t bother to clean up before they did (I’ve seen MLS listings like this, complete with dirty pots+pans in the sink!)? From the outside it looks like a dump to me, quite honestly.
Rob:
I am having trouble following the connection you make between the argument that prices are high because of land scarcity and the lack of available SFH lots. In all cities everywhere, all the of SFH lots are being used. There is no such thing a as a city with unused lots (that’s called a town). Surely you are not arguing that a lack of vacant lots makes Vancouver special in some way and justifies land prices out of keeping with everywhere else.
http://www.cbc.ca/canada/british-columbia/story/2009/11/09/electronic-arts-cuts-jobs.html?ref=rss
ooooohhhhh, baby.
its crumbling all around us now.
implosion sound will be deafening.
Rob – “but the facts speak for themselves: 20 years ago we weren’t building on Sumas Mountain or the mountains south of Chilliwack. We hadn’t filled 200th from the highway to Langley City with SFHs. Maple Ridge subdivisions hadn’t reached 232nd.”
But you can’t extrapolate past trends into the future. All that development was made partially possible by cheap fossil fuels which made commuting 100km a day a cost effective option over living in the city. If the cheap oil era is over or almost over then this trend will most certainly start to reverse itself. I’m not concerned about whether people like SFH’s on 1/3rd acre lots or not (in fact climate change and commuting concerns aside I wouldn’t mind that myself), the fact is in the future less folks will be in a position to pay for them or want a 2 hour commute each way. I’m surprised you would this tactic to try to prove your point, since I’m certain you don’t tell your clients, “Well the ‘facts’ of the housing market over the past 10 years speaks for itself…buy now or be priced out”. It’s all about fundamentals. Now, if you are arguing that gas price won’t be an issue or that rapid transit is filling the gap, well that’s a different discussion.
Purp:
You’re right, I can’t exptraoplate the future from the pat, anymore than you can be certain that the future will conform to your predictions.
Doesn’t matter. You’re changing the subject in an attemptto disprove my contention.
I say we have a scarcity of land and ask “If someone of average means wants a new SFH, where do they get it” and you answer:
“I’m not concerned about whether people like SFH’s on 1/3rd acre lots or not (in fact climate change and commuting concerns aside I wouldn’t mind that myself), the fact is in the future less folks will be in a position to pay for them or want a 2 hour commute each way.”
You’re just saying that there’s no scarcity for the article because demand for it is going to disappear. (Some would call that magical thinking).
Humour me. Suspend, for a minute or two, your conviction that your vision of the shape of future demand is incorrect, and that indeed, current patterns will prevail for the foreseeable future. Answer the scarcity question. Where does the average buyer go if he/she/they want a traditional style, new SFH?
Newcomer:
You’re “…having trouble following the connection you make between the argument that prices are high because of land scarcity and the lack of available SFH lots…” because I never made that argument. Prices are high now for a myriad of other reasons. Land scarcity makes a contribution to prices, no question, but it neither explains nor will maintain current prices.
Same question for you: Where does the average buyer go if he/she/they want a traditional style, new SFH?
Newcomer and Disbelief:
Really? Zoning and the ALR are going to disappear? For God’s sake, there’s pressure to create an ILR.
Punch My Ticket 34:
The point isn’t that prices have dropped and you can make vulture buys. Its that whether prices rise or fall there will be significant demand for SFHs and that will continue to contribute to land scarcity. If prices fall SFHs will become more affordable (what, builders are going to stop building completely?) At cheaper prices commuting becomes even more attractive. If anything, high housing costs help combat scarcity as it forces densification.
Rob
You ask, “If someone of average means wants a new SFH, where do they get it” and I’m not really sure what sort of answer you are looking for since clearly there are large numbers of SFH’s going up all over the region. Everytime I drive through the Valley I am stunned at the new development, so what point are you trying to make?
I am not clear I understand your position. What do you believe is the cause of land scarcity, is it that geographically there just isn’t enough land locally to build on and as a result the prices are bid up? You claim that there’s no question we are in a situation of land scarcity, but what exactly do you mean by that, because clearly anyone who wants a SFH in Metro Van can still have one. My only claim is that apparent scarcity and rising prices is driven by economics, not geography. Thus it’s no different than any other RE market regardless of geography, the fundamentals are the same.
You claim there’s no question that land scarcity contributes to prices, and I would like to know what you base that on other than your gut feel? How much is the scarcity premium in your estimation?
You say – “You’re right, I can’t exptraoplate the future from the past, anymore than you can be certain that the future will conform to your predictions.” — This isn’t about certainty, of course either of our scenarios could eventually prove to be correct. I was just pointing out the weakness of an argument that simply extrapolates past trends, I would have expected a little more rigour.
Anon/19… HP’s best guess as regards the short term prospects for Vancouver RE is that prices will continue to appreciate, albeit ‘moderately’ as compared to the recent run-up (more so, in certain highly desirable urban ‘micro’ markets/niches; far less so, towards the periphery – where I expect prices to stagnate at best or resume their downward trajectory )… Two important caveats, though - HP’s guess is predicated on the assumption (unproved) that strong exogenous demand (’safe haven seeking’ foreign capital/remittances, etc.) is the prevailing/dominant factor fuelling YVR RE appreciation – and secondly, that endogenous demand (of late, encouraged by low interest rates and transformative assets/aka the ‘bank of mom&dad’ ) is a subordinate variable of declining relative significance (i.e. – when politically motivated ‘price supports’ are withdrawn and demographic trends come home to roost endogenous demand will evaporate in the absence of a healthy regional/national economy).
Still, the numbers are what the numbers are… so, YVR is, apparently, different after all (until it isn’t). Perhaps because it has achieved ‘critical mass’ or de facto status as NorthAmerica’s AsiaPacific ‘gateway’ of choice (just not in quite the way/direction that the ‘gateway’ planners had originally conceived). A ‘perfect storm’, as it were, illustrating the dual effects of global capital mobility and ‘historical contingency’… Especially so for those who enjoy the ultimate irony of the descendants of the ‘coolie’ labour force upon whose bones the province was built as the new show-runners…
Medium term? GlobalMacro effects will predominate (for better or worse)…
Long term? I’ll leave you with with my favourite Keynsian witticism… “In the long term, we’re all dead.” In the interim, I believe the correct answer to GuyCabellero’s rhetorical question is, “Go East, young man!”
In conclusion, here’s a timely think piece from the UK Independent, ‘The mystery of rising house prices’…
http://tinyurl.com/ya5rlc8
Purp:
“What do you believe is the cause of land scarcity, is it that geographically there just isn’t enough land locally to build on and as a result the prices are bid up?”
Well, yes and no. Clearly, geography plays a huge role in supply. If you don’t have sewer and the land won’t percolate, you can’t build – I’ll call that a geographic issue. If you can’t pump water high enough up the mountain you can’t build – same thing – I’ll call that geographic. If you have to drive all the way down Burrard Inlet to Port Moody, then back through Ioco and over the hill to essentially get to within a ten minute rowboat ride of Deep Cove (Belcarra) – that’s geography. All geography touches itself (under all is land), but distance is a limiting factor.
Steep land is harder to build on and so is worth less than flat, easy to build on land. Riparian zones are off limits. Parks are considered necessities. Zoning laws exist to enhance or protect property values (and while opinions on the benefit of that vary, zoning still exists).
You can’t build on water.
You can build across the border, but the example of Point Roberts shows that land on the wrong side of the border is worth less.
We can go on and on. Does scarcity make prices rise? Sure it does. You’re not going to seriously take issue woth me over the laws of supply and demand.
Does land scarcity make current prices justifiable? I don’t think so. Land scarcity is more of a fundamental, and we’re out of whack with fundamentals.
You can argue that we can fit 50 million more people into the Lower Mainland, and that when the need arises we’ll do that. That’s going to take a long time. You ever try to re-zone something?
“clearly anyone who wants a SFH in Metro Van can still have one.” Sure, of course. We’re in an environment of record volumes so I can’t argue that people can’t get the product, but where do they have to go to do it? Farther and farther out, and I think that will continue. The effect of land scarcity will be increasingly felt by requiring people to either go further or go denser.
I’m not saying land scarcity fuelled the recent run up, but I am saying that denying that land scarcity exists sometimes appears to be a bearish over-reaction.
Good discussion.
Well, we agree that geography can play a role in what land gets developed, although I had no idea you can’t build on water
The central question is does this geography affect the total supply of developable land in a given urban area? Well, as long as the city is able to continue developing in one or more directions than the answer is no, since you can continually increase the theoretical boundary of the urban area to make more land available to compensate for any geographic constraints. So the supply can increase as fast as demand, there is no ’scarcity’ so to speak. You might counter here by pointing out that a city that can expand in a concentric way is more efficient than a city that is bounded in some way (as Vancouver obviously is). Maybe, maybe not, I’d say the biggest factor here is how the city is planned and the political will and foresight to develop an effective transportation network. You mention that zoning comes into play, again this is more of a political issue, than a purely geographical one.
You say, “The effect of land scarcity will be increasingly felt by requiring people to either go further or go denser.” No argument here, though we differ on which of the two will predominate. But as a previous poster noted, isn’t this is an essential feature of any growing city regardless of geography? Land scarcity is not really at play here. Effective urban design maybe, but not a physical shortage of developable land.
This is all just my 2 cents, feel free to rip up my thinking. However, I’d be interested to see data showing that cities that are geographically constrained have property values that rise at a premium to those that don’t, when you factor our economic strength. The examples that usually given, NY, Hong Kong etc. I think are confounded by the fact that they are all world leading economic powerhouses. I don’t think it’s at all clear that prices would have less upward pressure if they were located in a more favourable geographic (ie flat) location, look at London. In fact, maybe what you think is land scarcity due to geography that drives up prices, is instead the fact that these cities were founded in strategic areas (usually near water and farmland) precisely because they offered the best chance for economic growth which in turn drove up prices.
That’s my “bearish over-reaction.”
There is undoubtedly scarcity in land in Vancouver, regardless of how you would like to spin it. However, relative scarcity can change due to policy prescriptions, ie. shifting R1 to R3 zoning for instance, expropriation of land to convert to higher density, development of ALR. Of course, this may not be politically popular in many ways (NIMBYism). Scarcity is in fact a policy issue in some ways. However, even without zoning restrictions, land scarcity still exists. Highest and Best Use anyone? Land in urban areas is obviously more valuable and prices reflect this.
Geographically, Vancouver is very much constrained to an East-West corridor. This really can’t be debated. We do no have the typical monocentric city, a la Calgary or Edmonton. With the current “business” core right by the water, and premiums placed on “view” the downtown area is poised to remain very expensive. If you want cheaper, you go East or you go up (but again going up means significant policy changes). If anything what we will see (and is it already seeing) is a dual node region. finance, services, head offices and tech by the urban core, with manufacturing, business services, satellite offices centred in the Surrey region. The Surrey centred region will not be as expensive due to less relative scarcity. It is essentially a monocentric city in itself. Vancouver city is half a circle
Purp:
I think we really don’t disagree on too much – we’re looking at the same picture and emphasizing different details. I don’t want to over-emphasize the scarcity thing. It has its part to play, but its subject to everything else in play. We used to frown on basement suites (to cite one sort of densification). Land became relatively scarce so we changed the rules. There are lots of examples of that sort of thing.
Its probably better to be less vague and rather than say “land is scarce” say “developable land is scarce”; again, that’s subject to all sorts of other factors. Laneway housing, once it takes off, will add value to a certain style of Vancouver house because it will allow for more densification. The market will price it in because zoning, in that case, has effectively made more developable land. That shows zoning can work both ways – usually we describe it as falsely restricting the use of the land.
Beans:
Good points. Thanks.
I fail to see how the scarcity/land shortage thing fits into Vancouver’s price spike of recent years. Population growth in the region has actually been quite modest by historical standards during the run up, if you believe the official stats and not the anecdotes. We didn’t double the population or cut the housing supply in half, so why did prices more than double?
http://tinyurl.com/y99g8ub
Employment and especially income haven’t exactly been exploding either.
I’m inclined to blame historically low interest rates, but that doesn’t explain why Vancouver and Calgary exploded more than anywhere else in Canada.
Quite frankly, I’m at a loss.
D:
To clarify my position, I’m not saying that land scarcity is at the root of the spike you refer to.
I think this one’s beaten to death, but just to clarify, my original contention was to question the notion that says, “Well, they’re not making anymore land/land is scarce in Vancouver” which leads to ”therefore prices will keep rising”. While it’s obvious that have mountains to the north, a border to the south and the ocean to the west, it’s not at all clear to me to what extent those constraints affect pricing. Yet many people use those types of statements to justify higher prices. Similar to the ‘rich asian’ argument. It’s obvious that we have immigration and that some of those immigrants have a lot of money to purchase real estate, that tells us nothing of how much of an effect they have on price. I think the land argument is similar.
I’m interested in understanding the 80-20 ‘Pareto chart’ of contributors to price increases in Vancouver, because that makes it much easier to understand future price trends if one of those main factors changes. I think that many of the common arguments given for rising prices, though usually trashed by bears, are probably correct in that they exist, but probably much farther down the list having a minimal effect.
Let me put it to another way, what do you think are the top 3 drivers of rising prices in Metro Van? Does land scarcity fit on that list? For me, far away the largest factor right now is cheap credit, people can discuss all those other factors until they’re blue in the face, but if cheap credit goes away through higher interest rates the market crashes regardless of land scarcity, rich asians or the Olympics. I think we’re probably not too far apart on that assessment.
Purp/53… Quick anecdotal, fwiw – girl friend put 2 investment properties (west end condos in quality building near Alberni/Denman) on the market last month… both closed in less than 30 days at about 1.5% less than ask… VD – don’t read any further….
In both instances, buyers are non-resident foreign nationals assisting parachute kids with local accomodation. Co-incidence?
GuyCaballero… I think Tina Fey is will be dusting off her Palin ‘look’ sooner than we might have thought…
http://tinyurl.com/ydfcgz9
(readers comments are particularly telling)…
Thanks for the clarifications.