Weekly Stats
There were 1150 new listings this week and 479 sales in my target area this week, for a sell/list of 41.65%. Of the sales 22, or 4.59%, went over list.Average list price of sales was $540,912 while average sales price was $15,707, or 2.9% lower, at $525,205.
Average DOM was 37.
The average list price of over-lists was $710,168, while the average sale price of over-lists was $722,927, or +12,759, or +1.8%. Average DOMs for over-lists was 23.
Inventory reached 18,205, of which 3,471, or 19.07% were over 90s.
There were 827 price changes (what’s the sell/pc ratio? 57.92%!) Average original price was 642,635, while the
average new price is $25,580 lower, at $617,055. Average DOMs to price change was 56.
The average sale price this week was only 85.11% of the average new price for price changes.
In other words, the average sales price was 2.9% off average list price of sales, but the average new price of price changes is 16.98% higher than the average list price of sales.
The difference in opinion in the market is widening.
4.48% of all active listings in my are had their prices reduced last week.
189 comments
“difference in opinion…widening” – Rob, by this do you mean that certian sellers are leapfrogging their price adjustments to the downside? Could you further clarify – thanks.
Also, I saw the house I want to replicate, on 16th, look forward to discussing with you, and also about the coachhouse option…thanks.
WoW:
By “the difference in opinion is widening” I mean that there are multiple opinions now where there used to be fewer. Some sellers are sticking to their guns, and dropping prices by less than what some would argue they should. At the same time some sellers are probably accepting a little less. Some buyers are assuming they can get away with paying less, but others are still paying high prices. That’s four broad categories, and I think they explain slower sales, higher inventory, and no real price movement. I know you think we’re in price meltdown (although I haven’t seen it) but look at the stats for over-lists, or DOMs for all sales, or DOMs for price changes, or even average prices. They haven’t changed that much, even though inventory and sales have changed substantially. In other words, this is a market trying to reach some kind of consensus.
If sellers were leapfrogging their price adjustments to the downside I think we’d see new prices much closer to (or even less than) the average sales price, and we’d see sales prices moving downward substantially. We’re not seeing that.
Thanks Rob…I’m hearing a lot of anecdotal comments on 15% price declines in Surrey – wonder if its broadbased and if it will show up in the stats.
Here’s my guess. Close to 50% lower sales this summer, and negative YoY by end of September (recall, prices rose last summer, so if prices are falling now, then YoY declines accelerate)….if not earlier.
“By “the difference in opinion is widening” I mean that there are multiple opinions now where there used to be fewer.”
But of th0se 4 broadly categorized opinions, 2 are not really new and are conventional with respect to the old sellers market, while the other 2 are predictive of a new buyers market. So what is the difference between what you say and the statement that “the opinions are shifting towards a buyers market”?
Rob;
Its pretty easy for me to borrow money top buy real estate and thereby enjoy the power of leverage. I’m told that its just as easy to do the same thing with all sorts of investments, and that may be true, but I’m not familiar with how to do it.
Not as easy, I’d say, but possible. Certainly it is possible to do it if you want to open your own business, for example, either raising equity or debt. Can be done with derivatives to rather large amounts to emulate leverage…
What is harder is getting fixed rates… Real estate is certainly the easiest way to get money. After that you really need to be comfortable with the instruments.
I’ll use a real property as an example – the buyer put $18,000 down and mortgaged the rest. It cost $64,000 and cash flowed. 4 years later the place is worth somewhere north of $150,000. If you had paid $64,000 cash for it, no mortgage, would you consider the return the same as if you had paid $18,000 down and mortgaged the rest?
Before knowing the price run up, I would consider the expected rate of return to be equal. That’s because for every dollar (leveraged) up that it could go, it can also go down. The resulting ROR is, of course, different… because it was leveraged. Any gains, or losses, are magnified and thus won’t be the same. Better put, the average rate of return will be identical, if you include opportunity costs (negating the interest paid, etc).
The old story about the two buyers applies. Both had $64,000. One guy bought one unit cash, no mortgage. The other guy used his $64,000 to buy three units.
That guy that owned three places, in a 50% haircut, would have a worse return than the other. The dynamics of the return are symmetrical. You trade possible higher profits for possible higher losses.
The real point is that the guy that owns three places gets no income, whereas the other guy would get the equivalent of the interest portion paid out to him (since I am assuming that it is cash flow even). This is important to note because the interest income can then be reinvested over the same time period. I’m not going to run the numbers because I know roughly what they will show – that if the properties appreciate, then the higher leverage does better (and worse, if they do not).
Think of it like buying 3 properties at 100%, but literally having the cash on hand. Instead, you invest the cash in mortgage bonds that… match up exactly with the financing you have had. Exactly the same as having a DP, and very similar to reinvesting rental income throughout the years. Rental income will match up almost exactly with the return you would of had on the cash on hand if you don’t use it for buying a property.
Opportunity cost is absolute. Yes, leverage increases risk, and so in the above example, given the market return recently, the differences would be staggering. And it would be like that if/when the markets go down. However, since they are symmetrical, when we use time to smooth out the variances, the true differences get smaller. There is still a difference, yes, given that real estate is biased towards appreciation/inflation indexed and there are frictional losses due to differences in reinvestment rates of return (ie: if I invest the rental money at market rates, say 8%, the results will be different than if I invest in real estate appreciation of 5%).
—
Having said all that, I want to make it clear that I think real estate investing is biased in a way that makes leverage better than most alternatives. But it does come with a cost: risk.
Which one Wow? The yellow one at 16th and Maple? That’s a beauty.
Rob,
I was listening to The Tim over at Seattle Bubble yesterday (he was interviewed for a radio show) and he said he gets 3,000-4,000 hits on his site a day. Even he was surprised by how many people are interested in real estate.
Just curious, how many hits do you get and is it going up with the market going down? It might be interesting to watch and post this number every quarter. Whadya think?
forgot to mention that my post#4 was addressed to Rob.
VD – yes, yellow with black trim, and copper roofing….for sale (just built)…gorgeous…busy street though, but love the design – is that the one? think so…
ran into an ex-neighbor in my favorite coffee shop this AM
me: sell your place yet?
xnabe: no, kind of slow right now
me: i see there are 6 others for sale too
xnabe: yea,but i can wait
me: what are you looking for
xnabe: we want one in H&H
me:something will come up i’m sure
xnabe: you guys were pretty smart getting out a year ago
me: thnx but we were warned
xnabe: you knew this was going to happen?
me: yea, we had two years warning so we dumped it
xnabe; you are kidding! right?
me: nope just watching California market screaming GET OUT!
xnabe: shit!
me: how’s your lease on the Infinti? great looking car
xnabe:well gotta go
good news for housing…
http://news1130.com/news/local/article.jsp?content=20080707_092339_1752
We may be entering dangerous territory. Today’s Province newspaper reports, household debt has been rising steadily in Canada for 20 years.
Between 40-year mortgages and a softer real estate market, some recent homeowners now hold mortgages greater than the value of their homes.
Don’t tell that to tnq, he’ll think you are lying – mortgage worth more than the home? How? If prices are rising, how can this be possible? You must be wrong – my mother told me that you are wrong, so you must be wrong. I think I know that I am right, so I must be right and you must be wrong, and its right for me to be right, so I’m righ, and your wrong, because I’m right.
tnq…fade to screaming…
so I wonder how come 1% slide in benchmark price has erased months of gain?
was there any price manipulation or something we don’t know…
Calls of price drops are premature, and more or less wishful thinking out of desperation, the market is showing increasing signs of strength.
Sales had slowed, but are picking up again; I think Rob is definitely wrong when he says” a correction of 20% to 40% is coming, and rather sooner than later”
Later perhaps, but not until we add another 35% to 60% price appreciation
Real Estate Bull,
You’re joking right?
Thanks Bull – enjoy your gains, you and tnq are welcome to continue filling your boots….oh yeah, why are prices falling NOW? huh?
Bull – are you really Cameron Muir?
Rob: Are you and or the realtors in your office seeing price drops?
http://www.canada.com/theprovince/news/money/story.html?id=a500aaad-5e96-464a-806d-bf5c3955786e
come on Real Estate Bull
when will Rob tell the truth?
When has Rob
Somewhat interesting stat quoted by Bank of Canada deputy governor Sheryl Kennedy (in a (similar to the News1130) household debt article by Ray Turchansky in the Edmonton Journal, republished in the Province) that about half of the mortgages issued last year were of the 40yr variety and that it may encourage people to flip houses or buy more house than they can afford.
http://tinyurl.com/6lv4jh
Things can obviously change but it’s looking to me like no/low appreciation locally and rising interest rates (100pts or so) for the upcoming half year/year. I’m curious if the flippers and speculators will start to fall out of the market.
#11
“Between 40-year mortgages and a softer real estate market, some recent homeowners now hold mortgages greater than the value of their homes.”
These folks are f’d royally!!!
Choices:
a) Sell and write a cheque to cover the shortfall (if they still have cash)
b) Keep making high monthly payments on overpaid asset
What if great job transfer promotion opportunity comes up? Gotta pass up?
There is no question that buying at the wrong time can ruin you financially. Buy now and find out…. Let us all know how it feels. A fool and his 40 yr mortgage
Rob: “If sellers were leapfrogging their price adjustments to the downside I think we’d see new prices much closer to (or even less than) the average sales price, and we’d see sales prices moving downward substantially. We’re not seeing that.”
We’re not? Are the numbers at the Agent Will site incorrect somehow? Honest question, not being facetious.
http://agentwill.com/weekly-stats/
His numbers are already showing negative YOY. What’s up?
doubter. A lot of propaganda going on out there. Not saying it is agent Will either…
AGENT WILL’s #’s show a 9% decline in the past 3 months and 4% year-over-year – what gives – are his stats to be trusted? Are they too limited to be of use? Or are they statistically accurate and reflective of reality?
Anyone care to comment?
Nv2 :
You’re right that 2 of the categories are the same as in the apst market. I think you’re not going too far out on a limb in saying “we’re moving towards a buyers market” except that we haven’t seen enough price movement to make it really attractive to buyers. As I say, I think the market is in the process of coming to a consensus one way or the other (over the past several years everyone’s agreed that prices were rising, for example. You either paid the price or someone else did. That’s not the case right now, but prices still haven’t sorted the issue out).
Spectralshift:
“That’s because for every dollar (leveraged) up that it could go, it can also go down. ”
That’s very true. We assume a 5% per year appreciation rate, but its an assumption. What about times like now? Will we see 5% this year? Moot point, right? The other metrics don’t fit so we’re not buying anyway.
“That guy that owned three places, in a 50% haircut, would have a worse return than the other.”
Again, true, but to get something that cash flows with 25% down only tends to happen in environments where the chance of a 50% haircut are more remote than they are in other environments.
The guy with 1 place pays $64,000 and gets $480 gross per month, and whatever CA after the given time. The guy with 3 gets less monthly cashflow (still positive, so he does get some) but 3x the CA. Again, it doesn’t work when there is a high probablity of a haircut, but the other metrics don’t occur then either.
If I understand you correctly you’re suggesting that instead of buying 1 property for cash or three at 25% down, you buy 1 at 100% financing and also invest $64,000 in mortgage bonds. Am I reading you correctly? If so, that’s a third option (and sort of a hedge, no?)
Voomiting Dog:
Based on wordpress stats it varies from 2500 to 5000+ per day.
REB/DBIBC:
I’m pretty sure I report almost 2x as many price reductions as sales daily. No offense, but are you two each other’s evil twins?
they are likely converted to annualized rate from monthly rates.
“Nv2 :
You’re right that 2 of the categories are the same as in the apst market. I think you’re not going too far out on a limb in saying “we’re moving towards a buyers market” ”
Thanks for the response Rob. To be exact though, my point (from your stats) was not that the MARKET is moving towards buyers market, but rather that OPINIONS are undoubtably moving towards that of a buyers market, and that this might have been clearer than saying
“the difference in opinion is widening”
WoW: it may be that one year ago, the weekly selling price was a bit higher than usual, and 3 months ago the weekly selling price was also a bit higher than usual, and this past week the selling price was a little lower than usual.
If you look at PaulB’s weekly numbers, the average price last week ($819K) was 13% below the average price two weeks earlier ($945K). So the weekly average certainly jumps around a bit.
That, or the higher end of the market has disappeared, or we’ve got into ugly territory where the average price will drop at an annualized pace of 338%!
Thanks M, thats a good point, the data needs to be smoothed….
Wow,
How are you? I read your post about ‘replicating a house’. Could you elaborate a bit more?
I was thinking of just buying the land and building something new since I don’t really trust these cardboard houses. I prefer the walls to be made out of bricks and concrete, as it is very useful when your house is shot at.
Best regards,
arit
Why would your house get shot at?
I agree, if you build you have a better sense of what you get….hopefully you don’t need to wear kevlar where you plan to build.
Anonymous:
“but rather that OPINIONS are undoubtably moving towards that of a buyers market” , and that this might have been clearer than saying “the difference in opinion is widening”
Can’t agree. There are clearly lots and lots of sellers who don’t agree that we’re moving to a buyer’s market. Their opinions are valid. I think you can find a lot of buyers who also feel we aren’t in a buyer’s market (they’re not buying, implying that they’re waiting for better conditions).
What I think, and what I wanted to convey, is that some parts of the market think we’re going one way, and another part of the market disagrees, and the gulf between the two is widening. Price reductions used to be closer to average sales prices, for example. Succesful sellers seem to think the market is one place and unsuccesful sellers think its somewhere else. Succesful buyers agree with succesful sellers. Other buyers think the market should drop more. Again, a wider gulf than we had a few months ago.
You’re correct that the opinions of some are moving towards thinking that we’re in a buyers market. We’re far from a buyers market unless you define a buyers market as one where buyers can pick and choose what properties they want, provided they pay prices that are currently unsupported by fundamentals. That’s acceptable, but its not my definition of a buyer’s market. My definition includes the buyer exercising power to influence price. Right now buyers aren’t really calling the tune (what’s the dif between list price and sales price?)
Imagine a ball on a parabolic track; one like the shape and with the same inclination as one of Macdonald’s golden arches. The ball has sped up the track and apparently run out of energy just as it reaches the top of the curve. At that point, an observer may perceive that its motion has ceased. The truth is, it may indeed have ceased. In this case its going to – slowly at first – then faster as it accellerates, proceed down the path it has just traveled up. If it hasn’t entirely lost its momentum, its going to proceed down the far side of the curve, slowly at first, and then accellerate. The time the ball spends near the top of the curve is one of highly reduced velocity. Nothing seems to happen at first. Later, the ball travels very fast indeed.
Your point (#36) is well taken Rob.
ceejay:
That begs the question: is our market on a parabolic arch? If so, my observation that we haven’t seen a price change yet isn’t that valuable. The road ahead, and our destination, are clear.
I don’t think our market follows that kind of curve. I have a link to average prices from ‘77 to the present on the left- the closest we came to your analogy was ‘81/’82. If you look at attached and apartment prices its even less descriptive.
In short, we could go through an ‘82 style melt down, or a late ’90s style stagnation, or an early ’90s short drop and quick recovery. That’s multiple possible outcomes. I see price declines in the future. I just don’t know how deep, how long, or when they’ll start. Saying they’re happening now, or that we’re in a buyer’s market seems inaccurate to me.
Rob, you don’t know it (well, you don’t say it, but I think you do know it), we are going to accelerate down that path….who knows, perhaps price gains will completely evaporate. I run into NO real estate bulls anymore, and other than tnq’s screams, I don’t hear much from them anymore. Tide shifted. Downward acceleration is expected. At least by me.
No one has really commented on the Agent Will numbers. Rob? Do they tell an accurate story or not? If not, why not?
So housing prices are going up 5%?
Inventory is high and growing?
It’s takes time for psycology to change….
Agent’s can talk, “Market is still going on strong!”
Give the psycology thing 18 months, it’ll take this long for this market to really sink in to the masses.
Rob
Regarding the difference between list and selling price, I take your point about there not being a large gap between the two. On the other hand, with more than twice as many price changes on a daily basis than there are sales, you’d have to conclude that a lot of sellers are sharpening their pencils. I think this, combined a signficant reduction in sales, a corresponding build-up of inventory and flat or decreasing median and average prices could fairly be described as a buyer’s market “lite”.
Oh no Johnny, this is the best place on earth.
Prices will always go up, just ask SATV. He knows everything.
You see it’s not about the monthly payment for 40 years, you have to live for today. Max out man and live large! Don’t worry the lenders are to blame.
Rob, in every couplet you mention, there appears to be a good correspondence between the rate of increase and the rate of decrease in a market cycle. So maybe not McParabola’s in every case but in this one…
http://www.care2.com/c2c/photos/view/215/999959215/pictures_i_like/golden%20arches%20jpeg.jpg.html
It won’t take 18 months for the market to panic. It will take 3-4 months, now that Main Street Media is reporting negative RE info that has been in the works for around 6 months. Does the general public actually believe that the increased inventory levels and decrease in sales just occured last week?
This local RE problem is really nothing compared to what is happening globally. We are living in a time that is nothing less than historical. The fall of the Roman Empire will be compared to this time as a cake walk.
Make a little effort to be prepared, as the Boy Scouts say.
. We are living in a time that is nothing less than historical.
rob: engrave this in stone
“A follow-up to the last post on the future of suburbia: Last summer, on my political blog, I said the big story, then on nobody’s radar, would be real estate. My bleatings continued with little effect, so I decided to write a book about it. “Greater Fool” was published three months ago and is now into its second printing. My premise was simply that the US real estate correction would come to Canada, and it took me 200 pages to explain why. Trust me, subprime mortgages have little to do with it.
But, it’s academic now. Because it’s arrived. At least the start of the beginning has arrived. And I will say it again: This is the biggest story to impact the middle class, especially combined with our current, and mounting, energy crisis. In fact, the political party which comes up with an agenda of action for that beleaguered middle class will have a potent advantage in the next federal election.
Remember, after all, that it was the housing collapse in the US which brought that economy to its knees, devalued the greenback, goosed oil prices, created a global financial crisis, and cost Canadian banks about $10 billion. This, of course, is not over yet. American real estate prices have declined every month for 16 months; year-over-year values are down 15% nation-wide with some markets off 40%; and it’s estimated the bottom is at least a year away. Over 3,000,000 families have negative equity and there are over a thousand foreclosures a day. This is the worst housing crisis since the Depression, and it has spurred similar retreats from Europe to Australia.
Canada is not immune from this contagion.
”
The rest here:
http://tinyurl.com/36oab5
Wow,
I am lucky enough to be Canadian now. Before that I was Israeli, and I made sure my house was bulletproof. Very useful.
Best regards
Rob, I can’t tell you how relieved I am to see you softened your stand on that silly silly forecast of yours of “20% to 40% price drop of sooner than later” in a sea of madness it’s nice to see that some sanity still prevails.
I agree there are no indicators at this point which point to a price correction.
But as they say only only the ignorant and the dead can’t change, and if somebody can show me proof ……
http://langley-financial-plannining.blogspot.com
But as they say only only the ignorant and the dead can’t change, and if somebody can show me proof ……
we don’t have to prove anything, the onus is on you to back up your allegations…. iow put your money where your mouth is…….
ah I prefer tha money where the sun does’t shine.
Kudos Blue Skies
“I agree there are no indicators at this point which point to a price correction.”
Bhahahahahaha!
I’m sorry, that was uncalled for. Let me catch my breath and apolo…
Bhahahahahahahahah!
There are no indicators at this point that the Sun will come up tommorrow.
At last some real proof of price reductions
The Skylands at Morgan Heights in South Surrey had an advertisment today in the local paper of $50,000 – $103,000 off the last 8 of their Phase 1 homes (It’ll be a long time before phase 2-3 happen)
These a HUGE drops on $600K & 700K homes. Some are reduced 10% plus. These are new unsold homes. The developer must be hurting.
How do you feel if you bought some of the others at full price??? This is exactly what happend in the US with new buyers in developments getting their homes at big discounts to those that bought only a few months before. The builders could see the writing on the walls and ran for cover. This caused a lot of resentment and anger towards the builder and other buyers.
Well my friends, the time is now! Our market is a train that was just gone off a washed out bridge. The locomotive and first car are over and plunging to the river below. The diners sipping their wine in car #16 have no idea what is happening but even if they did, are powerless to stop it.
LOOK OUT BELOW! This is going to get ugly very fast.
McLovin
RE Bull
Hmm. Sell/List ratios that are a new low, for any month, since October of 2006. Benchmark prices virtually on par in June with what they were in March. Total inventory higher than it has been at any time of year. let alone at the strongest selling period of the year, for some number of years. Nope, nothing indicative here, and it would be silly to think otherwise, apparently.
I’m McLovin it, thanks!
TNQ stop your whiny screams, I’m trying to get some sleep…remember, its only $…actually, I mean that…I’m sure you will be fine, even if your wallet is getting lighter by the day…now….please…stop….SCREAMING…
This market has trouble written all over it. The real sellers are cutting prices and selling out and that will set the new highs, resulting in lower and lower prices. By October, we’ll be into a full scale meltdown. I was on the phone today with several top Realtors in the city and every single one of them said the writing is on the wall.
Jeff,
Thanks for you input.
But other than you, how many realtors are telling their clients what they are telling you?
McLovin
Jeff,
why don’t u start ur own blog?
We will rather visit ur blog than coming to this one.
Rob doesn’t give the kind of information you provide.
Jeff, Rob doesn’t see it – oblivious I guess….well, perhaps he is in bliss
Try this for close enough for proof:
http://langley-financial-planning.blogspot.com
The way I see it… got a client who is a seller… point out the obvious. Got a client who is a buyer… well maybe not so easy.
crasher:
we are clearly in a buyers market.
“We are clearly in a buyer’s market”? Numbers! I want numbers. I keep reading “whoo boy, it’s gonna be a rough ride down!” But I’ve been hearing this for years. It seems that there is some confusion about what is happening with prices. Some say they’re falling; others say they’re holding steady. What is it?
Doubter, try this.
Get up. Walk outside. Turn either left or right. Keep walking until you come to an open house. Take a look at the sheet. If the price is not already reduced, ask the Realtor if the seller is open to offers. Repeat until you have made up your own mind as to whether prices are falling. It won’t take long.
I got this over at Housing Panic:
“In your neighborhood, how much cheaper (%) per month is it to rent than “own”?
Hint – for those looking to call bottom in housing, there’s your key number…”
Rob, what was the MOI for June in your area?
thnx
How times have changed !!! I remember a dicussion in this blog some times ago about how insulting to the seller would be if you brought a lowball offer !!!
http://vancouver.en.craigslist.ca/rfs/744263896.html
C’mon guys, Real Estate Bull is obviously pulling a leg… Notice how in every one of his posts he keeps requoting Rob: “20% to 40% price drop of sooner than later”… Also notice he make a prediction so ridiculous he can’t really be taken seriously: “but not until we add another 35% to 60% price appreciation”.
German Guy…you are going to get yourself a great deal on a place when you make it out this way…another year or so….
Quotes that craiglist ad German Guy posted…
Hey you never know. located in the fraser ridge subdivision,where every home is worth well over a million dollars.
Worth??? if you say so…ain’t worth shite until someone buys it
Newcomer, the problem is that your method (walk around and ask) is totally anecdotal. If I find price flexibility on two of three houses in my neighbourhood, someone else will claim none in theirs. I’m interested in the big picture, and actual declines in selling prices. (Some might say that what I’m really interested in is being able to say, “I told you so!”) There seems to be some confusion or hesitation here, and no one seems to want to validate or invalidate Agent Will’s numbers.
Doubter – the fact is that prices have stopped rising and are just barely starting to fall now. You won’t see any “numbers” showing large price drops because there aren’t any yet. But that doesn’t change the fact that it’s inevitable. Look at the charts in the US from 2 years ago. Look at the charts from Vancouver today. They’re identical, as will be the result.
The difference between Rob and Jeff is that Jeff is primaritly moving DT condos where the market reeeeaaaallly has turned and Rob is dealing with East side houses where the market still doesn’t have tons of great inventory and properties here are still commanding high prices but taking longer to sell. Definitely a parabolic curve, I concurr.
Not to say that one won’t effect the other–it will. But for now their perspective reflects actual micro-localities on the ground. But agreed, by October, even the East side will be a hurtin’.
doubter – a previous poster did make a good commentary on Agent Will’s numbers. The weekly averages will have a tendency to fluctuate due to the small sample size – ie. the number of total sales in a given week. Even monthly averages, which will give more statistically relevant data than weekly averages, are subject to a fair amount of fluctuation. This is why some people prefer benchmarks.
Thanks, Joshua.
Doubter: see my comment #32 regarding the validity/usefulness of AgentWill’s weekly average.
vomitingdog:
very good point… everything west of main is hurting versus east of main where affordability is better.
G Force: “Look at the charts in the US from 2 years ago. Look at the charts from Vancouver today. They’re identical, as will be the result.” I’m not sure they’re identical (where can we see this?), and certainly the activity behind them isn’t/wasn’t, as has been pointed out here many times (we don’t have the same subprime mess). At any rate, even if they have been “identical,” it doesn’t necessarily follow that they will continue to be.
Joshua and M-, thanks. For the benefit of those (like me) who may have missed it, could someone define what “benchmark” means?
inventory on east side is growing, sales are slowing…it will catch up….listings have slowed a bit, and a lot of expiries have yet to show up…wonder if we see a bit of a surge over the remainder of the week….Jeff, do you think prices decline this month?
why do they spin the data so much?
Upper Valley Real Estate – June 2008
The Chilliwack and Area Real Estate Board released statistics for June 2008 and here is where things stand in the Upper Fraser Valley.
There were 237 residential sales compared to 365 last year for a 35% decrease in sales activity.
There were 1959 active listings as of June 30 compared to 1063 last year at the same time for a whopping 84% increase in inventory.
Months of inventory stands at 8.26 months which is well into the area needed to bring negative price changes.
The press release put out by the board is useless and unprofessional. The CADREB does not compile a benchmark price or track/release median prices so it is difficult to say what the price changes have been so far. Anecdotally we are already at YOY % price declines according to some.
Here is a short video called “Money as Debt”. It should be required viewing in schools. Where does money come from? Seems a simple question but in fact 95% of people have very little understanding. Many people on this site seem to be trying to analyze the real estate market as its own entity but it is not. It is part of a whole. If you understand the notion of where money comes from, and how it disappears when lending slows or stops, you can get an idea of the big picture and why our entire global economy, including real estate, must correct itself in an endless series of booms and busts. We’ve had the boom and we can mathematically prove that the current system cannot boom forever. It must bust to re-balance debt and money supply. That is beginning to happen now.
I strongly urge people to educate themselves with the video below. It isn’t some conspiracy theorist rant, it is very factual and verifiable.
http://video.google.com/videoplay?docid=-9050474362583451279
Rural England is in a complete standstill. Just spoke to my mother-in-law who has had their house on the market for 7 months. The last house she owned which was in a super prime location next to a Cathedral in the midlands has also been on the market for 6 months. No buyers. And both her and the new owners of her last house have already reduced prices stirring up absolutely no traffic or interest. I’m starting to see what Rob means by “most houses in a down market don’t sell.” Scary. I think we’ll be putting ours on the market come September. It’s East side so let’s hope this micro pocket holds up.
Point Grey and Dunbar — 8 and 11 months of inventory!
From http://www.stuartbonner.net
June stats
Pt. Grey
9 sales
72 properties (8 mos of inventory)
Dunbar
9 sales
99 properties (11 mos of inventory)
Note that for May it was
Pt. Grey
20 sales
73 properties (4.5 mos of inventory)
Dunbar
14 sales
87 properties (6 mos inventory)
Again,
Whybuywhenucanrent’til’13?
**Forecasting a 50% drop in Van area RE values by April, 2012!!**
50% drop. LOL cmon go all out and say holocaust.
20% is more real. remember theres zero down and 40 year amorts and the kicker is that not everyone has bought! Their waiting.
Hey Rob, apparently you are the place to be to read about the impending Real Estate crash in Vancouver. You should be proud!
Hey $fromA$ia,
50% isn’t a holocaust, that would be more like 75%.
You make your prediction, I’ll make mine, and we compare notes, April 15, 2012, 2150 E Hastings, 7PM.
BTW–what if The View gets shut down halfway through construction–anyone have a suggestion for a backup location?
Again,
Whybuywhenucanrent’til’13?
*!* Forecasting a 50% drop in Van area RE values by April 15, 2012 *!*
anyone looking to answer doubter’s questions might find this helpful:
http://tinyurl.com/4g7c3u
Anonymous, you’ve simply got me wrong. I have covered this ground before. I am a bear, I believe the market will turn, but it has been so long in coming that I honestly started to have doubts. Part of it is just a desire to see real figures; many or most of the posts here are purely speculative, with nothing to back them up. That’s fine, but I like stats and real arguments. I also want ammunition with which to counter the bulls in my life — mostly my wife, who thinks we should buy right away.
I’m not a troll, just hoping for real evidence and still only 90% sure that we’ll see a significant correction right now.
“purely speculative, with nothing to back them up”
Are you kidding? Look at the dramatic sales and inventory statistics. Look at a graph of US housing prices and look at what inventory and sales did just before prices started to fall. Notice that the vancouver market is following the US pattern with a lag of two years. This means price YOY price declines a just a few months away.
If you need more that this to tell you that prices are about to tank in vancouver, you will unfortunately never make a timely investment in your life.
The signs indicating a major market shift do not get any clearer than this.
If this to your wife is evidence of a continued bull market, then I feel sorry for you, man.
“I made sure my house was bulletproof. Very useful.”
Arit, how exactly did you do that? I’m looking to bullet proof my own place.
Public gun battles and shootings in vancouver and the burbs are pretty common. Near my parents place in Richmond there was a machine gun battle with over 200 rounds fired. Miraculously, no one innocent was hit.
So far my only idea is to build a nine foot stone wall (attractive of course, perhaps covered in nice ivey) with a steel gate.
WoW:
Ther Chilliwack Board is pretty small compared the the REBGV. You’re probably thinking that the stellar service provided by the REBGV is some sort of minimum standard – in fact it’s very good.
Vomiting Dog:
Because we’re linked to investment proeprty we tend to sell all over (i.e., not just the east side). Maple Ridge to Westside.
Doubter:
I don;t know where Will is getting his data (aide from the REBGV, but I don’t know what areas, etc). I haven’t seen YoY price drops, however. I’ll ask him to post something here explaining what’s up.
Pearl:
I haven’t done month end stats yet, so no MOI, but I’m sure it will be 7+ by now.
Jeff:
“we are clearly in a buyers market.”
You and I differ on that. I think we agree that its more challenging to sell right now, but as for it being a buyer’s market, are you able to get great deals for your buyers or do you find sellers sticking to their guns? I find the latter. Some of our offers are very dicsiplined, and we simply get turned down. How do you define “buyer’s market”? My definition is a market where buyers have the power to influence sellers to accept prices that are beneficial to the buyer. I don’t think we’ve seen that change yet, and so don’t call this a buyer’s market (at least in a meaningful sense of the term). Why do you call it a buyer’s market?
I like your input here, even if we disagree on some minor points. For those who think you’re giving them the straight goods while I’m not, here’s a quote from you regarding pricing adn the future:
“I believe that Realtors don’t know where prices are going. They might continue up or might correct or might even crash. Rob is a very reputable Realtor if he is pointing out the downside to his clients. ”
and something I’d like to add: I’m saying we aren’t seeing significant price drops yet, that we’ll see a correction of 20%-40%, sooner rather than later.
For the life of me I can’t see the dif between that and Jeff saying “By October, we’ll be into a full scale meltdown” unless you want to say 20%-40% isn’t meltdown.
McLovin:
Its a fine line to walk between saying “The market will be in full scale meltdown by October” and pointing out the hard numbers making up the market in a particular area. We point out, when listing or acting as a buyer’s agent, that inventory is 50% up and sales 40% off, and that we’ve just gone through a 6 year run up. Some people hear that and some don’t (WoW always refers to my buyers who are watching the market with hawklike eyes – trust me, they are doing that, and like doubter, looking for signs that they should buy, where 4 months ago they were looking for what they could buy. What’s the same? They still want to buy).
That said, I’m sure a lot of Realtors don’t look at or share the numbers or their feelings about the market. Others (believe it or not) don’t see any danger.
It will be very interesting to see what big developers do with their projects coming online, as you’ve highlighted. There could be some deals to be had there.
blueskies:
“We are living in a time that is nothing less than historical”.
As opposed to all other times, right?
ceejay:
If you were to say that the sizes of the peaks and troughs are increasing, I couldn’t disagree. The only brake on the down side will be rising rents/inflation/growing population. Are any of them quick fixes?
JR:
“On the other hand, with more than twice as many price changes on a daily basis than there are sales, you’d have to conclude that a lot of sellers are sharpening their pencils”
Can’t disagree, but I do have to point out that the gulf between average sales price and the new price of price changes is wideing, and its not all because average sales prices are dropping. Unsuccesful sellers aren’t sharpening the pencil enough, I think. The questions are why, and will they?
I think most people underestimate the burning desire of Vancouverites to own RE.
A good friend of my, beautiful, smart, and a law graduate, works part time as an “escort” just to help with the mortgage payment.
Another good friend of my is the process of selling one kidney, for a down payment on a condo on the Drive.
Another good friend of my is the process of selling one kidney, for a down payment on a condo on the Drive.
hilarious sendup!
an arm and a leg for N Van.
Hey Bluekies, you finally caught on!!!
I thought you would have been the first, but mighty beat you to it.
Arm and a leg pull, for north Van, that is.
RJ:
rents +4% pa
Population + 2% pa
Inflation works both ways, so its a wash. Lets deal in real prices.
RE: at least + 12%/annum for the last 6 years.
Suppose we add pop growth as a price increase factor for rent. (legally, rent increases are restricted for unimproved properties with ongoing tennants, but adding the 2% deals with renos and move-ins, for the sake of argument).
Price equilibrium with rent is about 5.6 years away if RE flatlines today. Without investors for 5 years, prices won’t likely hold up.
Burden of Proof: no, I’m not kidding.
“Look at the dramatic sales and inventory statistics. Look at a graph of US housing prices and look at what inventory and sales did just before prices started to fall. Notice that the vancouver market is following the US pattern with a lag of two years. This means price YOY price declines a just a few months away.”
It really doesn’t necessarily, you know. I don’t think that the Vancouver graph tracks the US graph perfectly over, say the last 25 years, does it? (I actually don’t know, but I would be very surprised.) I think there have been some fairly good arguments made here that the situation isn’t exactly the same.
I’m not saying prices will go up. But then, prices haven’t fallen much in New York City or Boston, have they? There are some people in Vancouver who think that we’re on par with NYC. I think they’re wrong, but psychology is a powerful thing, especially if those people have money.
I’m partly playing devil’s advocate here, and that arises out of a nervousness that comes from years of confidently predicting a correction or crash, while watching exactly the opposite occur, and the resulting financial strife. Not buying five or six years ago is the biggest mistake I ever made in my life. I don’t want to repeat that kind of mistake, whether it means buying now or holding off longer.
an arm and a leg for N Van..
It’s worse than that the drive is east van
re: 97…I meant RC, not RJ.
Hey RJ, what ya think of my UAUA options now, baby. Martini’s tonite, lol.
Doubter;
One factor not always recognized affecting the current price drops or lack thereof can be described like this:
In todays market only 3-4 sell out of ten listings. These are the best valued ones, obviously. That value can be either sharper pricing, or a better property for the same price. Last year these are the ones that would attract the multiple bids, sell for 10% over list, and pull the market up. This year they are the ONLY ones selling,they sell at list and the lesser ones just sit there. All comparable properties when the realtor looks at recent sales, same age, size, neighbourhood and so one, but some just plain “feel” better. Could be the next door houses, the yard, the little touches, the feng shui, all those indefinables. Not so much the flooring or appliances, that’s easier to define. The skill/hucksterism (take your pick) of the realtor and the staging is part of it, but not all. Thus the “price” may not budge, but a price drop has happened.
In this stage of the market it is not surprising the reductions aren’t showing up in the published stats, but they are coming soon. Nowhere near buying time for us yet, though.
BTW, you don’t sound trollish to me.
REB. Thats nuts>>> I’d never go to those lengths to own. Perhaps the escort just likes SOME THINGS about her secondary work *wink*
cj,
ya feels great when u hit a home run. enjoy.
there has been another tectonic shift felt in the markets today – it is lower in the richter scale than the march 12, 13, capitulation but it felt the same…. let’s see how it plays out
anways – i am seeing reduced prices in north van condos.. but NOT in Coal Harbour except at the Venus Studio…..
lame.
patience is bitter but her fruit is sweet.
“REB. Thats nuts>>> I’d never go to those lengths to own. Perhaps the escort just likes SOME THINGS about her secondary work *wink*”
pat bell, you may be partially right, I went out with her for a while, and I must confess, she was quite adventurous; in fact a couple of times she talked me into being a little frisky with her and one of her girlfriends. (I had been drinking; she took full advantage of me)
alexcanuck, thanks, that sounds like a plausible explanation of what we see happening. The desirable properties lead the market. Perhaps the next step would be price reductions of the “others” to compete, along with a perception on the part of the buyers that the “intangibles” of the desirable properties aren’t, at a certain point, as important as the difference in price. And so begins a downwards spiral.
Frustrating to be called a troll. It’s my emotional investment in this whole thing. I’m too old to be renting, and I just want to be settled. But not before it’s time. I won’t wait and try to predict bottom, but I really, really look forward to getting something half decent for my money.
alright Re Bull. Now you’re workin’ it
Should see my wife….grrrrrr. She is adventurous too…she makes babies with me…”tee hee” ka ka
Doubted…I’m 43 and have never owned. I have 3 kids. Sure, would I rather own…yeah….EVENTUALLY. Not now…
ps Mark…watched the money video…thats a good one…and I concur…we should be showing that to kids in school. It is, however, too much for my grade six class. High school….yes. We should be teaching way more about business and finances in general.
anyway…time for me to retire…… my real view of the market is that it is finally on its death bed.
And it was fun getting Rob to back peddle from his” 20% to 40% price drop, sooner than later” I believe were the words he used.
And no I don’t think it will be 20% to 40% it will likely be over 50%.
50% Com again? Are you BS?
ceejay:
re:#97 -when I ask how quick a fix rent increase or inflation will be, I think I was pointing in the same direction as you. After the run up we’ve seen we need mega inflation or mega rent increases to keep nominal prices where they are. Even if we had those it would be, like you say, a wash.
A little more on my post above “but some just plain “feel” better”. That is, of course, not a factor in cookie-cutter new construction, only resale and and mostly SFH, a little in some townhouse stuff as well.
Doubter,
As you know, I’m with you on the doubting front. If any city could hatch a golden egg and avoid this whole mess, it’d be Vancouver. And it’d do it just to annoy ME.
But is 5-6 years really a long time for an economic cycle or any other historical cycle for that matter? If you were reading about it in Economics 101 textbook in high school, “unprecedented global house price inflation that gripped virtually every capital in the world between the years 2001 and 2008″ would you really say to yourself, My God those people who didn’t buy in 2000 must have been really frustrated.
WWI 1914-1918, 4 very long years, I can assure you.
WWII 1939-1945, 6 years that must have felt like an eternity
The Great Depression and the Dirty 30s: 1929-1939 yikes!
2001-2008 The Great Global Real Estate Boondogle. You won’t even think about it come 10 years’ time.
Actually, RC, I had forgotten the legislated 4% includes CPI deflator. So if we add 2% (real) to 2% (population increase pressure) then if RE prices stay constant, rent’s wont catch up in comparable cost to owning for (drum roll) 11.5 years!
Vancouver: the place to buy in 2020!
With a senario of investors unable to profit, and therefore out of the market for a decade at constant prices, this place is going to capitulate (good term, RJ).
vomitingdog: “2001-2008 The Great Global Real Estate Boondogle. You won’t even think about it come 10 years’ time.”
Yes I will, as I sit sipping a nice bottle of wine in the lovely house I bought from a “greater fool” in 2010.
Rob:
I think you are clever and I love this blog… I think the conversation is great and I have a lot of respect for you.
I don’t think we differ much in our opinions. I agree with your point that buyers are not getting fantastic deals, but I also think the market has changed and sellers can’t just price their properties and sit back and wait for a buyer. We are seeing a lot of price drops and rising inventory and that leaves sellers needing to change their price lower to compete.
Perhaps we’re selling close to list price, but what if the price has been cut $40k (10%) and then we get close to list… does that mean the seller had control? … maybe after a couple price drops the sellers stuck to their guns.
A buyer’s market to me is one that has increasing inventory, declining sales volumes, sellers competing with each other through several price drops to encourage a shrinking pool of buyers to purchase their property. People on the street saying the market has changed and Realtors acknowledging the market has changed.
Amen, Jeff.
Realtors only acknowledge or admit the market has changed after they have sold thier investment properties.
doubter – you’re not a troll, so don’t worry about those that are baiting you.
I’m 37 and a renter, never owned. Whaddya know, life got in the way – grad school, kids, more grad school, finally got kickass job, looking to buy but … prices outta control… wish I’d got my new job 5 years earlier but what can ya do?
I’m waiting for prices to correct, and they will… in the meantime, I’m not too worried. My rent is less than half the cost of owning, I’m banking the rest, there are plenty of ways to build wealth, but buying in the current market is not one of them. My landlord f-ing rocks, BTW – buys me whatever I want, stainless steel appliances, new paint, new fence – he’s even thinking of installing a hot tub…
don’t doubt, live your life… keep an eye on the market, be ready to strike, and when the time comes we’ll be sittin’ pretty…
Whoops, above post was me…
Anecodote alert!! Anecdote alert!!
Was out in the yard (of the house I happily RENT)… neighbour’s boyfriend’s buddy was yakkin – hey this place I saw at blah blah blah, it was like 539 a couple months ago, now its 499, its awesome… Other neighbour leans across the fence – ya, prices are droppin, you should wait a year… Other guy – totally, I hear ya…
the word is out, its on the street.
Doubter–
Prices down about 6% on large Point Grey building lots. They were selling around $268/sf in Dec and Jan, now down to $253/sf. Might not look like much of a drop, but that’s $100K on an a 50 * 122 building lot. This is in a “blue chip” part of town, normally considered to be the first to go up, last to fall. So they say…
And V706124 was first listed for something like $1399000 and just sold for $1179000, that’s $261/sf for a smaller building lot, also down from the Dec/Jan range.
If you need something for your wife, call an agent and have them print out all the 33*122 lots with small houses sold in Dunbar/Pt. Grey for the last year, see how the price per sf rose, then fell.
Again,
Whybuywhenucanrent’til’13?
This may put some more fear into the smaller pool of potential buyers:
Report: Leaky condo crisis is worse than first estimated
Wednesday, July 09 – 06:15:00 AM
Treena Wood/Vancouver Sun
VANCOUVER (NEWS1130) – The chances are you know someone, or you are someone, who has been affected by BC’s leaky condo crisis. It’s far from over, according to a report published in this morning’s Vancouver Sun.
It estimates there could be 85,000 units leaking, more than the 65,000 estimated by the government.
The consultants who wrote the report for the Homeowner Protection Office say the government still doesn’t know the “full extent” of building envelope failure.
In the worst case scenario, over two-thirds of all the leaky condos in BC still haven’t been fixed.
http://www.news1130.com/news/local/article.jsp?content=20080709_091459_12992
99.9 the Fox….talked about the Vancouver Sun editorial that focused on the declining consumer confidence in Canada, and the 43% DECLINE in home sales in the lower mainland last month…its hitting MSM folks, and its going to pick up in volume.
Good times.
reversal in financials
[...] July 2008 · No Comments This exchange reported by blueskies at Rob Chipman’s blog July 7 2008 at 10:47am [...]
[...] And they are now getting some relief from signs that change is afoot. These anecdotes from Joshua on Rob Chipman’s blog July 08, 2008 at 10:23pm and 10:26pm [...]
I think the leaky condo story was subsumed by the incredible house price inflation story. Four months ago, I walked into one of those Granville Island stucco condos and the agent said with pride that the owners had just spent $110 rainscreening their building, so there’s nothing to worry about.
Yeah, right. Nothing except the flat roof where water sits and waits to do what it does best–follow gravity and run down a wall. Just like it did for the last 20 years.
I dunno. Maybe I’m being a bit hard on water and gravity. They’re bound to have a change of heart soon.
I’m also the type to walk up to a forman and have a chat about the state of the building. One interesting foreman at a Yaletown leaky condo restoration spilled the beans. He said don’t buy in this building until we’re done and then pointed out all the other buildings in the neighborhood that would have the same problems… mostly on year 12… a good 2 years he said after the 2.5.10 bullshit warranty is over. Most of what he pointed to were Concord Pacific buildings.
Buyer beware, guys. I know over on RE Talks one poster said Concord was good. Not good, baby, not good. Neither are the other ones.
Sorry. Forgot the K. The owners had spent 110 thousand for their portion of the rainscreen bill.
Rob would disagree with you VD, its not expected to rain anytime this week, so there is no problem, until there is a problem – how can there be a problem when there is no problem. Its not even raining, and condo’s can’t leak without rain, so get your facts straight you fearmonger!
I’m watching the market like a hawk.
Well…at least empty condo’s don’t cost a lot to heat….I’m sure a lot of folk will want to upgrade to bigger McMansions, so that they can enjoy ever larger energy bills…perhaps this will drive the next surge upward that tnq is anticipating…I dunno.
Breaking News from The Globe and Mail
Home energy bills may be highest ever: BMO
VIRGINIA GALT
Wednesday, July 09, 2008
Total spending on energy by Canadian households likely hit an all-time high as a percentage of disposable income in the second quarter of this year – and those home-heating and electricity bills will head even higher this winter, says Bank of Montreal economist Douglas Porter.
Mr. Porter calculated that roughly 7 per cent of disposable household income went toward gasoline, natural gas, fuel oil and electricity in April, May and June.
“While raging gasoline prices have been hogging the headlines, natural gas has been quietly rising every bit as fast as crude oil in the past year (doubling in that period), and this will wallop household heating bills this winter,” Mr. Porter wrote in a research report issued Wednesday.
“With many of the energy input costs for hydro companies on the march, it is only a matter of time before electricity prices also lurch higher in many provinces,” Mr. Porter said.
The dramatic rise in energy costs has dampened consumer confidence and is expected to push the inflation rate higher.
The Consumer Price Index report for June, to be released July 23, “could hit the 3 per cent barrier, and threatens to push above the top end of the Bank of Canada’s comfort range in the next few months,” Mr. Porter said.
This is totally OT but I’m not sure where else to ask.
I am relocating to Vancouver in September and I’m looking for a place to rent. Are there any real estate agents that handle a lot of rental places? Or good websites for rentals?
I need
-at least 2 bedrooms
-a place the allows dogs
-a bit of grass for late night emergency dog bathroom breaks
-In Vancouver, North Van, Burnaby, PoCo, Coquitlam, or Port Moody (no bridges expect for North Van)
-okay transit
-rent of no more than $2,200
-one parking spot
Would like
-a fenced yard and a place for a veggie garden
-3 bedrooms and 2 baths
-a house or end unit townhouse
-less than 2,200 a month;)
Thanks for any help.
WoW:
I’m in awe of your talent for misrepresentation! You’re getting better and better, my friend.
- “Problem” is relative. A return to fundamentals allows me to sell more investment properties and make investments here myself, so in one sense a correction is welcomed. Less than a return to fundamentals makes it easier for guys like you to buy residences, which, again, makes it easier for me. It also makes it easier for me to sell properties for long term holders.
On the other hand, a market way out of whack with fundamentals makes it impossible to sell investment properties, impossible to buy investment properties here for myself, impossible to sell to many FTBs, and very hard to pull off trades.
So, is the aspect of a 20%-40% correction a problem? Depends on your perspective, I guess.
Are prices falling right now? They don’t appear to be. Listing prices are falling, but sales prices? Not so much. The best analysis, I think, alexcanuck’s – the listings selling now are the best ones. Once most of them are gone prices will start falling. He might be right.
Its easy to say that the sky is falling right now, but the evidence on this blog indicates that people who made that claim in the past have changed from saying “Its happened” to “It will happen”. So far it hasn’t actually happened.
But I do like how you can find the buttons!
Vomiting Dog:
Lots of flat roofs in this town have been around for years and years. They don’t all contribute to leaky condo syndrome (in fact, I think most leaky condo problems arise from something quite different). Leaky condo is an issue, of course, and without reverse gavity to bail you out it can be a challenge. By the same token, increased density as a response to affordability and the environment means we’re going to see more and more condos, and so more and more leaky condo potential. New building practices should help.
Granville Island stucco is what, mid 80s vintage? Not the same as what gets built today.
“But is 5-6 years really a long time for an economic cycle or any other historical cycle for that matter? ”
Real estate is long term, and in this business, 5 years is overnight.
Anonymous:
“My rent is less than half the cost of owning, I’m banking the rest, there are plenty of ways to build wealth, but buying in the current market is not one of them. My landlord f-ing rocks, BTW – buys me whatever I want, stainless steel appliances, new paint, new fence – he’s even thinking of installing a hot tub… ”
Looks like a win-win, right? If it was a bad deal for your landlord, wouldn’t he just sell now? In short, buy with good metrics and it possible that you’ll find great tenants who will love to pay off your mortgage. Once you’re in, sometimes as metrics get worse, tenants get better.
Jeff:
“I also think the market has changed and sellers can’t just price their properties and sit back and wait for a buyer. We are seeing a lot of price drops and rising inventory and that leaves sellers needing to change their price lower to compete”.
The only thing I take issue with is the “need to compete” bit. A certain percentage of sellers don’t need to compete. They can just leave the market. Right now that’s an unknown quantity. In ‘82, for example, stagflation with high interest rates put lots of pressure on sellers. Not so much now. We’ll see in the coming months if we see both low sales volumes and low sales prices. That’s a lot less painful than high volumes and low prices.
“but what if the price has been cut $40k (10%) and then we get close to list… does that mean the seller had control? ” No, the seller didn’t have control. But if average sales prices haven’t moved significantly then looking at price reductions on listing prices is a little like whistling past the graveyard.
“A buyer’s market to me is one that has increasing inventory, declining sales volumes, sellers competing with each other through several price drops to encourage a shrinking pool of buyers to purchase their property.”
I’d tend to agree, and we are seeing that. For me though, there’s one more important component: the purchases have to be clearly beneficial to the buyers, and I don’t think we see that enough these days. Last year we could take a risk with people buying a home and try to insulate them from rising purchase costs, and we were succesful. We could pull off good trades for primary home owners. We couldn’t make smart investments (and haven’t been able to for quite a while). I’ve got a hard time telling my buyers “This is a buyer’s market” and then not being able to show them many direct benefits.
“People on the street saying the market has changed and Realtors acknowledging the market has changed”. Saying the market has changed ins one thing. Deciding that since its not a seller’s market it must be a buyer’s market is another. Everyone on this blog recognized the changes as we saw them, because we all saw them in the numbers. What we disagreed on is what the change meant (and we still disagree on that). Simple question: in a rising market its easy to act for both parties, becaause you can tell your seller “You can’t lose selling at a profit” and you can tell your buyer “this is a great deal and the market is still going to go up” (we were in that market not so long ago, as I think you’ll agree); today, if you list a property, can you easily tell both buyer and seller that the transaction is a clear win-win?
ceejay:
Rent control applies to existing tenancies only. If housing demand is high, it counters rent controls more; if its low rent controls matter less. That said, I think the 11.5 year calculation is stretching it, but, as I’ve indicated, I don’t think we’ll see rents/inflation exercise enough upward pressure on fundamentals to wipe out downward pressure on prices quickly.
Ryan:
Hit Craigslist, or contact Chan at my office at coronetpm@gmail.com – she’ll tell you of any vacancies we have.
Rob – I note on PaulB’s site that sales are coming in around 96-97% of asking.
Are asking prices falling?
Is this below ask selling price weaker than previous year?
Is this indicative of lower prices?
Thanks, and ya, I’m just pushing buttons…you have to get me some data on if/how carriage house solution might make sense for me. If you need an agency agreement signed, it can be done, but as I’m not buying for a bit, perhaps is premature…
http://www.cbc.ca/canada/british-columbia/story/2008/07/08/bc-leaky-condo-towers.html
Ryan, if you look hard enough you should find something in Tri-Cities (and you don’t have to go all the way to Poco). I’d narrow the search to there because you’ll be disappointed at what you can get in Vancouver or the North Shore, and the competition is fierce.
Last year, in Coquitlam, I found an older 3 bdrm, 1.5 bath with a yard and allows cats (don’t know about dogs) for less than $1200/month (in a four-plex). You’re big problem is the dog, especially if its a big dog. Make sure you have vets reference and other documentation ready.
I found it in the daily newspaper. Landlords have to pay to advertise so they aren’t fooling around with imaginary rent prices.
Last year, I called a real estate agent (not Rob) who was advertising rentals. I politely asked about finding a new 2 bdrm condo for $1200/month, and he said “Good Bye” and hung up. Total jerk. His agenda was obviously not to help people find affordable housing.
Good Luck!!!
Rob;
That’s very true. We assume a 5% per year appreciation rate, but its an assumption. What about times like now? Will we see 5% this year? Moot point, right? The other metrics don’t fit so we’re not buying anyway.
Yup, but likewise, we can probably expect most income producing instruments to appreciate. Stuff like bank stocks, natural resources, etc all tend to inflate like real estate.
A good way to illustrate the opportunity costs is to compare personal property to REITs, which you can buy on margin. What is the difference between a REIT at 30-50% (“DP”) that hold properties with equity at about 40-50% and owning your own private property? In effect, the REIT does the management for you (similar to your job). Certainly there is differences in granularity and you can’t really do stuff like renos and such, but on paper it turns out to be very similar.
Course, stuff like CREIT only returns about 5%, which in RE terms is pretty lousy… but then again, it has appreciated some 300% over the last ten years and income has risen at about 2-3% to date.
The major issue is getting secured cash. For a person who owns their own home, mortgages it to 100% and buys REITs at break even… I’d say they’d do extremely well over the long run, just as they would with property in general. By my calculation, I’d say that in terms of CA, you gain more from that approach to Real estate investing… but on the other hand, you lose control of the investment itself – everything becomes managed, so even though you can sell easier with lower transaction costs, you lose flexibility in terms of management.
If I understand you correctly you’re suggesting that instead of buying 1 property for cash or three at 25% down, you buy 1 at 100% financing and also invest $64,000 in mortgage bonds. Am I reading you correctly? If so, that’s a third option (and sort of a hedge, no?)
Hmm, what I’m saying is that the methods of financing tend to average out. Leverage is risk when the asset is the same. The more leverage you have (ie: 128 000 in cash owning a 64 000 property, 64 000 cash and a 64 000 property and 64 000 cash and 128 000 property) relates directly to the risk you are undertaking. You profit more with higher risk, in general (this is generally true across the board), but there is a trade off.
The mortgage bond example was just to illustrate that where the cash comes from doesn’t really matter. By having the cash, borrowing money, then lending your money to offset the borrowed money, you are in the same position as just buying the property. That’s the “hard” version of using rent to offset the interest. If someone pays cash, they end up with the same income and leverage, but the appreciation differs according to leverage.
By buying multiple leveraged properties, you are just converting the (rental) return, in advance, into commitments. The alternative is to buy one property and take the full return, holding onto the cash to buy properties in the future. They don’t actually end up all that different – but it depends on the rate of return on the cash held and the capital appreciation.
—
But as you say, buy on the metrics. It’s the same for any investment, and in my opinion, anything dealing with money. Still, ownership holds a great deal of risk. Leaky condos are an example in this thread.
Rob said, Lots of flat roofs in this town have been around for years and years. They don’t all contribute to leaky condo syndrome (in fact, I think most leaky condo problems arise from something quite different.
Rob,
Here in the Pacific NorthWest we have blowing rain. Roof pitch isn’t the probem.
Design is the facter, how flashing, windows, gutters, quality workmanship, building materials etc.. all work together to shed water properly.
A low sloped roof sheds water fine if it is installed properly such as Modified Bitchumin or BUR roofing is good. Low slope is less then 4 to 1 slope.
Its water penetration under the eaves or soffits that matter, also if theres brick vaneer exterior do they have proper weep holes at (i think its 3 brick intervals with a 1″ space behind.) Some building are ment to breath behind the walls as well….
the facter is the building with the shortage of unskilled labour!
Ya, if the whole ‘leaky condo’ worry starts to impact newer builds…then….what does this do for condo re-sales in Vancouver – help or hurt?
Rob, your prediction is that prices don’t fall in July – care to bet dinner on this?
Ryan,
here are a few rental websites you might want to check out:
http://www.housingmaps.com
http://www.amsrentsline.com/
http://www.bcapartmentowners.com/for-rent.html
however, some landlords (especially for houses in high traffic areas) don’t advertise their properties online or in the papers, they simply put up a sign in the window.
“I’ve got a hard time telling my buyers “This is a buyer’s market” and then not being able to show them many direct benefits. ”
Good point. I view this as a declining seller’s market. Selling now will, under most circumstances, benefit the seller. But what’s in it for the buyer other than a depreciating property?
Realtors at most of the open houses I’ve attended so far have just blurted it right out “It’s a buyers market now, great time to buy!” But when I ask why it’s a great time, they say “You have room to negotiate on the price, and prices are forecasted to go up!” I generally just smile and nod at that point.
Rob – “Are prices falling right now? They don’t appear to be.”
errr… *checks June benchmarks*… yup, down.
exx – “declining sellers market” – I like that term.
Hi Joshua – I don’t get that either, prices seem to be down, according to the stats, and places are now increasingly selling under list – perhaps Rob uses a different type of metric for ‘down’ than us normal carbon lifeforms?
WoW…Jeff, Rob, TNQ – will this affect local RE prices going forward? Perhaps a surge of 40 year mortgage buyers till October? What do you think???
Wednesday, July 09, 2008
Government of Canada Moves to Protect, Strengthen Canadian Housing Market
Big news – this is going to put the death nail in the coffin of the Vancouver Real Estate Market and it is exactly the kind of catalyst I thought the market needed to push us over the edge. See the Press Release:
The Government of Canada today announced adjustments to the rules for government guaranteed mortgages aimed at protecting and strengthening the Canadian housing market. The new measures include:
Fixing the maximum amortization period for new government-backed mortgages to 35 years;
Requiring a minimum down payment of five per cent for new government-backed mortgages;
Establishing a consistent minimum credit score requirement; and
Introducing new loan documentation standards.
Today’s announcement marks a responsible and measured approach by the Government to ensure Canada’s housing market remains strong and to reduce the risk of a U.S.-style housing bubble developing in Canada.
The new limits are planned to take effect October 15, 2008. This would allow existing mortgage pre-approvals with the common 90-day duration to be used or expire. Certain exceptions would also be permitted after October 15. The Government will work closely with all stakeholders to ensure timely and effective implementation of these measures.
As these measures relate only to new, government-backed insured mortgages, Canadians who already hold mortgages will not be affected by this announcement.
The measures announced today will build on the strength of Canada’s housing market. According to the International Monetary Fund, the increase in house prices in Canada is based on sound economic factors such as low interest rates, rising incomes and a growing population. A recent Statistics Canada report concluded that home ownership is at record levels, with over two-thirds of Canadians owning their own home.
Mortgage arrears—overdue mortgage payments—have also remained low. In recent years, the percentage of mortgages in arrears for three months or more continues to be at low levels not seen since 1990.
this will be very helpful for Greater vancouver RE…
http://www.canada.com/vancouversun/news/story.html?id=44931920-b3cc-4419-843e-6eafa5aed359
RE: WOW NEWS RELEASE
“The measures announced today will build on the strength of Canada’s housing market”
LOL
can you say violent shift of demand curve to south-west quadrant……
The suckers have until Oct 15th to be drawn in – realtors, start your engines!:))
Breaking News from The Globe and Mail
Ottawa revamps mortgage rules
Globe and Mail Update
Wednesday, July 09, 2008
OTTAWA — Ottawa is revamping the rules for mortgages guaranteed by the government, limiting maximum amortization to 35 years and implementing a minimum down payment of five per cent.
Current requirements are for 40 years’ amortization and zero per cent down payment.
More to come
© The Globe and Mail
RJ – another catalyst brother! Still, patience is req’d….prob have some great unwashed jumping in while zero down 40 years are still available, perhaps there is a spike in buying…that said, I don’t think it will do much for near term firming, and we know what the longer-term trend is looking like…
35 year amortization is still long, but a good step nonetheless.
so we have about 2 years(06-08) time for allowing 40 yr term on the market, leaves 38 more. considering more than half of new loans issued during that period are 40 yr loan, the amount is still considerable.
Finally, it will set a maximum of 45 per cent on a borrower’s debt-service ratio – the proportion of gross income that is spent on debt service and housing-related fixed or essential payments.
BUT AREN’T MOST VANCOUVER HOMES PRICING IN AT AROUND 80% GROSS INCOME TO DEBT SERVICE RATIO – ROB, JEFF, WHAT DO YOU THINK OF THIS – IS THIS BIG NEWS?????
The recent spike in mortgate rates did not seem to produce more sales from existing pre-approvals in June.
It would be interesting if new government regulations create any significant pick up in mortgage applications and RE sales before the deadline.
The FIRE industry is trying to pump and sqeeze the last drops of economic rent from serfs.
Garth’s comments …
Bye, bye 40-year ‘rent’
July 9th, 2008 — Book Updates
Well, just when you needed some proof that the Canadian housing market is in serious trouble, here it is. Closing the barn door after the livestock is already out of the country, Ottawa is nixing 40-year amortizations, which are really rent, reducing the allowable and insurable term by 5 years. In addition, CMHC will no longer be in the no-money-down real estate business, insisting on 5% downpayments to qualify.
Also kaput are interest-only loans, liar loans (made without enough proof of a borrower’s ability to repay) and – here’s the blockbuster – a max of 45% for a borrower’s debt-service ratio. This is not the best news in, say, Vancouver, where people have routinely been forking over 70% of their income for the privilege of living in a deflating bubble.
The reforms are welcome, of course. But we needed them two years ago. No point now.
Game. Set. Match.
This turkey is done.
Rob – what do you think of Garth’s comments – will this be particularly problematic to Vancouver’s market?
gov’t regulation or lack thereof fanned the flames…. and now they are peeing on the bon fire…..
stinks… but good for me
The move from 40 yrs to 35 and 0% down to 5% looks like political window dressing to me. I’d be suprised if this had any real impact on mortages approvals in near future. Perhaps if things get really ugly, Ottawa can point to this as evidence of a proactive solution.
Does anyone know of any real figures setting out the number of mortages out there with no money down?
DigDug…good point…not sure how much impact it will have, but its not ’supportive’ of more speculation, and is restrictive, at least at the margin, imho.
It is big enough news to be the leading headline on the financial press right now…then again, its hot off the presses, so we will see…big writedowns being called for on royal bank, etc., so that is also key news on the day…dunno, all I see are lots of for sale signs and few sold stickers, so hopefully that is a ‘clue’.
Game. Set. Match.
This turkey is done.
WoW :
love the way you mix your metaphors, analogies
and cliches…
hey BS, they all fit!:)) I think!
Hope you are enjoying all the news that is starting to really support our thesis.
The 45% debt-service ratio is intriguing. It’ll be interesting to see how the policy is drafted that may effectively uphold the principle. Still lot’s of room for creative bankers I’d imagine.
http://www.fin.gc.ca/news08/data/08-051_1e.html
Do the BANKS actually give out loans with higher than 45% service ratio?????? ie. is this a change that will have impact or is practice already dealing with that? thanks.
Dig Dug,
Whats the difference between 5% down and 0% down?
Whats the diff between 40 year ammorts and 35?
Can you say, “LAME!”
Rob/Jeff – would you expect this to push up the pace of listings?
Joshua:
Benchmarks declined marginally, average for the whole Board is up, medians mostly down, some up, and my averages pretty flat within a narrow band. If you pick one number you can support any direction.
$fromA$ia:
Thanks for the lesson. Read the comment that said flat roofs are a recipe for leaky condos. I didn’t write that one. Adjust your aim, ‘kay?
WoW:
I think Garth is a great self-promotor. I don’t think he’s as wise as some think, but I’m sure he’s pretty smart. I don’t see him as an oracle, but don’t really want to go on any kind of crusade against him.
I don’t know anyone who gets a mortgage based on 80% GDS.
CMHC backing away from part of the market is good. With private insurance available it would probably be good for CMHC to back away completely.
Government lack of regulation fanned the flames? I love that. I guess we need more CHMC control over what lower income Canadians can buy. That’ll certainly keep the rich in line. I can only wonder why we didn’t think of that earlier!
This news of nixing 40 yr am’s is much bigger than people think. A full 50% of new mortgages in Vancouver the last 12 months have been 40 yr. am’s. This means that the very bottom rung of the pool of buyers has bought and therfore cannot buy in the future to support dropping prices.
This is very big news indeed.
McLovin
Rob,
“Government lack of regulation fanned the flames? I love that.”
I see your point..
I should of said the gov’t easing the regulation… fanned the flames.. then tightening is like pissing on the fire. it is steamy and really stinks…..
McLovin: Yes, and I think the requirement for 5% down and the 45% of debt service maximum will also cut out a swath of speculators and many FTBs as well. For the time being anyway – in a couple of years prices will have declined enough for FTBs to be able to buy again.
Rob – if the mortgage comes from a Canadian BANK (vs. other institution), and it is insured, does it not have to be CMHC (ie. they will be governed by these rules) – I’m not totally certian so look forward to your feedback. Also, don’t the BANKS issue a fair amount of mortgages? Just wondering, they have all those branches and people and all that stuff….
I have always believed that our government is at least partly at fault to promote today’s housing bubble with a 40 year mortgage and 0% down. Rob has in the past disputed that idea as he believes it’s the banks that are being creative. My counter argument is that banks are regulated by government so ultimately it’s the government that let the bubble develop. To be clear, government should have no business promoting owning vs renting unless government has some magical way of not using tax payer’s money when in trouble.
Well the link from “don’t buy in BC { 07.09.08 at 12:05 pm } 144 ” pretty much says that government does have a very important role – they “authorize”.
News from Reuters
Canada job prospects seen thinning in June
09/07/08
By Louise Egan
OTTAWA (Reuters) – A hiring spree by Canadian employers may be finally starting to wind down and reflect the slowing economy, a turning point that analysts expect to see confirmed in the June employment report on Friday.
Whats the difference between 5% down and 0% down? Whats the diff between 40 year ammorts and 35?
About $5/month per 100,000. Wheee.
Do the BANKS actually give out loans with higher than 45% service ratio?????? ie. is this a change that will have impact or is practice already dealing with that? thanks.
No, not exactly. I went around shopping for mortgage rates when I bought – 7 places and a broker. All of them tried to maintain the 30-40% range to differing degrees. However, the following certainly happened a lot;
1) Overstate income. Not exactly intentionally, but rounding up… using bonuses as regular income, hell even including (in my case) interest income on the DP. It added up to a fair difference.
2) Irregular income become regular income. My GF at the time didn’t have regular income, but they took the “high” end and made it regular.
3) They tended to… overlook or understate taxes, fees and so forth. Was easier for me since I was buying a new place without any history.
I don’t believe that many people in Vancouver have a 80% ratio. What was stated was that for the average person(s) with an average wage to buy a place, they would have to have an 80% ratio. Of course, this ignores that it wasn’t average people getting in at that ratio, or that it doesn’t matter if it is 80% when you have a renter that covers 30% of that ratio, etc.
These are mostly edge cases. The impact won’t be all that significant. It pales compared to the banks self policing themselves now that they are feeling the impact… it is harder now to get a discounted rate with minimal downpayment, for example. Before they just gave me the best rates they had so long as I could afford the place I was buying. “Afford” as in “will the computer let me do it” kind of afford.
Rob said: “Lots of flat roofs in this town have been around for years and years.”
Yeah and the further back you go the less likely they are to leak. What I said still stands. Buyer beware on all these new-build (past 20 years) condominium towers. It’s not that complicated. The roofs don’t work. Whether it’s the building code, poor labour or poorly chosen materials, it’s a money pit.
Have we forgotten that it’s just not normal to need to remove and replace the exterior cladding and framing of a building every 20 years. It’s just not normal. Only in Scamsville, BC, the originator of the leaky condo. But hey, it’s good for builders. Build it. Then re-build it 10-20 years later when the building boom has peaked. jobsforever.com
Sad…I think the jobs market is turning…
Breaking News
ACTS lays off 650 amid Air Canada cutbacks
The Canadian Press
Wednesday, July 09, 2008
MONTREAL — ACTS is laying off 650 engine and aircraft maintenance workers in Montreal and Winnipeg because of capacity cuts at Air Canada and turmoil in the airline industry.
More to come
No TNQ, job cuts are not bullish for condo flippers – no.
Your screams are starting to grate on my nerves…actually, no, that’s not right…I am enjoying them….keep it up – but now I hear a lot more screamers than before, guess you have company.
By way of example, the Finance Department said reducing the amortization period to 35 years from 40 years on a loan of $200,000 at 6 per cent interest would result in a $41 increase in the borrower’s monthly payment.
There goes the monthly KD budget…
Vomiting Dog:
By all means, buyer beware. But flat roofs don’t equal leaky condos.
WoW:
“Rob – if the mortgage comes from a Canadian BANK (vs. other institution), and it is insured, does it not have to be CMHC ”
I don’t believe so. I believe it has to be insured, but the insurance can come from other sources (Genworth, AIG, etc).
Annon:
The government “authorizes” by passing the laws. Banks and insurers then conduct business within those boundaries.
Rob: The government “authorizes” by passing the laws. Banks and insurers then conduct business within those boundaries.
So if 40 year with 0% down was within boundaries and now it’s not. Is that indirectly admit that they made a mistake? What good is law if it is as loose as none?
The lending has just got tighter… albiet marginally but it will have a negative effect on RE… It all has an impact. It could be the tipping point we are looking for…. We maybe able to thank the gov’t for something at least. This and the $100 thanks…
Rob,
The new rules apply to the other insurers, including Genworth and AIG. The rules are not restricted to CMHC – they are for *all* government backed insured mortgages. See http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2008/07/cmhc-drops-100.html
Adjusting aim, Thanks Rob!
Looking at homes listed in Richmond. Theres allot better homes available in the 5-600k range than 3 months ago!!!
STILL OVER PRICED THOUGH!!!
I think the 45% ratio will be the kicker, my nephew and his wife qualified for something like 6 times their salary in debt. They had a healthy downpayment but could not afford to pay what was offered, this was 12 months ago. They could have got even more if they wrote down that they had rooms for rent on the application.
Tightening the credit lending rules will help. It is stated over and over that canada is different, but with mortgage brokers, ( do a search) you see all kinds of junk loans available just like the states. Over half of the loans were 40 yr, and probably only 5% down or less. I personally know people that had and still have interest only loans in Canada.
When this BS lending ends so will the vancouver market…
Interest only loans. Wow, how desperate is that?
Annon:
My point is that the government isn’t a really active player with the agenda of pumping up the market. I also doubt that they’ll be bailing out any mortgages with CMHC’s money (which has been a cash cow, hence the pressing desire of competitors to get in that market). The argument that the government has made a mistake by pumping up home ownership with taxpayer money is, I think, weak, but feel free to put some meat on the bones.
Now, if you’re thinking I support 40 year, 0% down mortgages as a great idea whose time has come, um, what part of old right wing conservative white guy didn’t you recognize about me?
Diane:
You’re absolutely right. There was no intention to imply that private insurers don’t have to play by the same rules. The next question I have is: what do you mean by “government backed”? Where, or when, does the rubber actually hit the road there?
Rob: government isn’t a really active player with the agenda of pumping up the market. I also doubt that they¡¦ll be bailing out any mortgages with CMHC’s money.
What difference does it make if it is NOT government’s agenda to pump up the housing? The fact they let 40 year mortgage with 0% is bad enough. Just because they didn’t intend to, what they did become part of what pumped up the housing boom. So this is meat on the bones? And I am just not sure what you would define as active player and/or what relevance that definition serves.
Last year when rates were climbing there was a surge of sales through the summer and fall while pre approvals for lower rates were being taken advantage of.
That was last year and we were in a sellers market.
The buyer was the one feeling the pressure to get in before it became more expensive.
Now this summer things are different.
We are clearly in a buyers market and sellers are being pressured to drop prices to make the sale. I think we could conceivably see sellers panic more than buyers this time and start to see some serious downward pressure on prices. We aren’t the only ones seeing prices drop and the market weaken. EVERYONE I talk to is seeing the same thing.
Annon:
It sounded like you said the “… ultimately it’s the government that let the bubble develop…government should have no business promoting owning vs renting …” and then you asked if changes to the rules indicate that the government recognizes that they’ve made the mistake that you identify.
I disagree that they had pumping the market up as an agenda. I also doubt that the situation will become so bad that they’ll bail out the lenders with taxpayer money (some of the insured mortgages are privately insured, and the CMHC ones have a pretty hefty premium stream). That’s all we disagree on.
40 year mortgages with 0% are not a good idea. I think a lot of people rolled their eyes at that (and other vehicles as well). I’ve said before that we’ve seen more changes in the mortgage industry in the last 8 years than we saw in the previous 25. They weren’t all good changes.
Anyway, the relevance of active player with an agenda is simply that you seemed to be saying that they were doing what they did with a specific plan – I don’t really agree with that part.
Dig -
You’re right. Its a buyer’s market. How can a buyer possibly lose in this environment? A seller, on the other hand, selling now? Big loss, right? Big trouble. Wouldn’t want to be in his shoes. No sirree.
Give me a call tomorrow and we’ll go out and grind some seller and force him to accept within 3% of his historically high asking price. Its a buyer’s market and he’ll have to accept. I mean, if everyone you talk to sees it that way, how can they be wrong? Whaddya say?
Like I said: sales are way off, inventory is way up, we haven’t seen prices move significantly yet, and this is far from a buyer’s market. A little patience might be in order.
Real estate is 90% psychology.
Now that sellers are starting to realize that “suckers” aren’t as ready to buy, the prices will adjust.
Down goes a lot faster than up.