Dramatic market changes
This is a pass-off post to Paul Boenisch at nvcondos.ca who has just posted some dramatic month-end June stats on his blog.
If you haven’t seen these numbers yet, or if you have any doubt that the Lower Mainland real estate market is undergoing a dramatic shift, check them out now. Supply continues to grow while sales keep dropping.
Here are a few highlights:
Sales down 41% from June 2007
Inventory up 53% from last year
North Vancouver inventory up 113%
Check out Paul’s blog for all these stats and more graphed out for some dramatic visuals.
So far prices haven’t been impacted much at all, but increasing supply and decreasing demand will put pressure there unless this dramatic shift reverses soon. Could we be in danger of tracking the US market?
July 3rd, 2008 at 8:30 am
"Now, it’s becoming difficult to get higher paying jobs and it is these jobs that would ideally meet inflationary pressures"
It's extremely important to understand that while we see CPI inflation it does not mean that wage inflation is a sure thing and for house prices total wages is what matters. CPI inflation without wage inflation is devastating for house prices. Even if there were wage inflation, interest rates would be much higher and eroded affordability would destroy high prices faster than wages could be raised to compensate. Either road you take, the end result is devastation.
Save a massive sweet crude oil strike in Queen Elizabeth Park, nothing will save Vancouver house prices now.
July 3rd, 2008 at 8:15 am
"we produce things that the rest of the world needs to buy like… um….
Lululemon?"
Some Lululemon articles are produced in Vancouver, most are produced in; United States, China, Israel, Taiwan, India, Thailand and Indonesia.
July 3rd, 2008 at 7:01 am
These days, inflation is our major threat. In all the 3rd world countries, inflation rate is inching upwards and some speculate might become double digit come this summer or have already been. People need to understand that when easy credit is available, people's first instinct is to exploit it to make MORE MONEY. That's how you drive prices up, sans fundamentals, because easy credit itself is someone else's or fiat money.
Bernanke tried a passive deflationary tactic without having to raise rates and is having some success so far. He doesn't want a repeat of the 1970s and 1980s, but I think sooner of later he will have no choice, because while house prices are trending lower, it's not low enough to cause the economy to spiral into a deep recession. Which means, inflationary pressures will continue to increase. They need a deep recession to cleanse all the bad credit and re-price them to proper fundamentals before we proceed to the next boom phase. This hasn't happened yet.
Canada, too, is facing a similar prospect as the US albeit at a lag. While we are unlike the US in some things, I think we may end up with the similar outcome. Today, house prices are high not because of population, best place to live and great breathing air. They are propped up because, it is easy to borrow money and it is an acceptable form of investment practice. If you take out the borrow money part and expect all people to pay for their own homes with cash, see how many souls can actually do just that.
But remember, if we expect higher home prices, we also must expect higher inflation rate to come which means less discretionary spending and which can lead to more job losses, companies on the brink of bankruptcies and subdued wages because of the increasing labour market.
Now, it's becoming difficult to get higher paying jobs and it is these jobs that would ideally meet inflationary pressures. Traditionally auto jobs are threatened. How many people will be working for $8 to $10/hr jobs here if inflation keeps rising? How many companies will survive with the lack of these employees? If you raise salary and so will your prices, but we are all cutting back on other stuff to say money that goes towards higher gas prices and food. It's a vicious circle. If the Fed or BOC continually deny inflation is on the rise or is on its magical 2.2% rate, then eventually there will be very few people left wanting to spend anything more other than food, shelter and medicine. Then more companies will fail and more unemployment.
How do you propose people pay their mortgages if they are out of work? If they can't pay their mortgages, how do you expect home prices to continually rise? Do you expect lenders to lend money to these people and expect no financial compensation? Do you think these people are stupid?
When I see people justify higher home prices with immigration data and current prices, they are all looking at a rear view mirror. When the economy is receding, people will move to wherever job prospects are better. It's called the brain drain, or maybe people had forgotten that term from the mid to late 1990s. Who says people will stay here forever?
July 3rd, 2008 at 6:37 am
"The way I see it, with the great inventory available in these Western provinces and prices that are still very reasonable by international standards"
Just more proof at how little anyone outside of BC really cares about BC and more specifically Vancouver. Remember that BC real estate is 95% local and the 5% that isn't is drying up fast.
July 2nd, 2008 at 11:57 pm
This thread just goes to show how you have to be careful with sarcasm. No matter how dripping with sarcasm your posts are, no matter how over-the-top and outrageous they sound…they're still hard to distinguish from the authentic bullish posts these days.
July 2nd, 2008 at 10:44 pm
I still think Browntown has an unhealthy obsession with nuts.
July 2nd, 2008 at 10:06 pm
Is Krissh impersonating himself and then calling himself on it?
Why don't you find out from the pope?maybe you are worried about the real answer right?tdk? oh i mean bdk?
July 2nd, 2008 at 10:05 pm
thet weznet me abock who write wrong that market going down
July 2nd, 2008 at 9:59 pm
Is Krissh impersonating himself and then calling himself on it?
It makes sense to try to bring the blog off topic, so to recap
1.The Condo Market is finsihed.
2.Pre Sales at TV Towers are going to sell for $120,000 each within the year.
You never could get through the kids book "The Emperors New Clothes" could you?
July 2nd, 2008 at 9:31 pm
yeah thats a bad browntown impression unknown nutslapper! take your cash to ontario and look for job in gm plant or starbucks, report back one year let us know how it goes! good thing here we make grass and yoga gear, helps keep the market calm! ha ha
July 2nd, 2008 at 9:19 pm
yeah!yeah!! browntown professor was trying to nutslap american because more the vancouver market will appreciate american less likelly to buy in usa same song is this headslaper from ontario is singing to halt migration from ontario to vancouver, man oh man who bought his book "greater slapers on earth"?I guess nutslapers!
July 2nd, 2008 at 9:13 pm
don’t buy in ontario! soon gm plants go bankrupt meaning big recession!
Yep, good thing that here in BC we produce things that the rest of the world needs to buy like… um….
Lululemon?
July 2nd, 2008 at 8:31 pm
Not in VICTORIA!!! Victoria is the greenest, most environmentally conscious, politically correct, liberal multicultural, grain fed, organic city in the world. Even the $40 tea at the empress is organic and socially responsible made by goats. Victoria's energy comes from wave power and the poop we flush into the sea.
July 2nd, 2008 at 8:06 pm
yeah slapnuts i agree, don't buy in ontario! soon gm plants go bankrupt meaning big recession! interest rates coming down lower than a prairie sunset! means positive cash flow for brown and in town! yeah
July 2nd, 2008 at 7:14 pm
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,./l;l;l;
It’s funny how the Chipmanonians attribute the meltdown in the US to the subprime, and the buffoons leap into the false claim that in Canada we don’t have subprime.
Fact is we have subprime, 40 year mortgages, stated income, and interest only, second, and third mortgages and approvals based on fiction.
It’s just a straw man argument, intended to divert the fact that the subprime market in the US is not the problem, in fact there is a huge glut of mid to upper range priced homes, and the foreclosures are no greater in the low priced homes.
Sure the low end side of the market has its share of foreclosures, but the glut of inventory, and the bulk of foreclosures is not by any means restricted to the less than perfect credit scores.
July 2nd, 2008 at 5:46 pm
I think the housing slow down will be isolated to Eastern Canada. There is just too much of an economic boom going on in provinces such as BC, Alberta, and especially Saskatchewan to indicate that there is going to be any sort of slowing in the housing market. In the case of Saskatchewan, I just read that the most recent statisics indicate that the housing prices are going to jump by a further 36% just this year, so if one was looking to buy this would still be an excellent place to purchase as the massive equity gains in the first year will offset any sort of extra interest that would accrue should someone choose one of the new innovative 40 year mortgage systems. The way I see it, with the great inventory available in these Western provinces and prices that are still very reasonable by international standards, buying and starting to earn immediate equity (36% as mentioned before if purchasing in Saskatchewan) makes a heck of a lot more sense than waiting on the sidelines and just falling further and further behind while prices to continue to rise. I think its pretty much a fact that oil won’t be dropping below $150 a barrel again, and with provinces like Saskatchewan literally floating on this black gold the average income levels for the residents are going to soar and continue to drive up housing prices. Add in other demand resources such as potash and uranium, and you have potential to have one of the wealthiest populations of the western world. Can you say 0% income tax in the near future as the province pays off all of its debt? It’s in the cards my friends – just give the new government some time. So in short, would I buy in Ontario? Heck no. Would I buy more properties in booming western Canadian locations like Saskatoon? In a heartbeat. Even though prices have jumped somewhat over the past years, they are still a relative bargain and are a sure thing to appreciate in the coming years.
Just my two cents for what its worth.
this is a comment by "michael" from garths blog
dosh is that you in disguise?
July 2nd, 2008 at 5:36 pm
BDK,
Isn’t it Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc.who said Canada has avoided technical recession in other artical from Statistic Canada where Vehicle sales and retail sales edges up along with fuel and grocery prices?
I don't know what is wrong with banks and their economists since they had handsome hair cut in hollywood parlour they feel like world class customer for hair stylests.They should use stylests from vancouver where extra care is being taken.
July 2nd, 2008 at 5:15 pm
I find the whole "history repeats itself" concept fascinating to watch unfold. What I find particularly interesting with the oil prices is the ripple effect in the 70's and 80's… guess where we are today?
Oil closed at $143 per barrel.
From the Vancouver Sun today –
The agency (OPEC) suggested in a news release accompanying the report that the world may be going into "oil shock" for the third time in history — "record oil prices in recent months have become a threat to the global economy and social welfare of millions of people."
Energy is the basis of economic development, and if it's too expensive over a prolonged period of time, it can trigger inflation, economic stagnation and unemployment.
Oil shocks in the early 1970s and 1980s had precisely those effects on the global economy.
http://www.canada.com/vancouversun/news/story.htm…
July 2nd, 2008 at 5:10 pm
staggeringly self-absorbed
beautiful turn of phrase
so apt it makes my teeth hurt
July 2nd, 2008 at 5:10 pm
Anecdotal:
I was at a new condo building this afternoon. In a conversation with the Manager I learned that the building is 40% vacant. In case you are curious it's a 16 storey – 122 Unit development. That's approx 48 Units vacant. He went further to say that when they sold that development, people bought in "blocks". Meaning they bought 5, 6 or 7 units at one time. Some flipped post-completion (all of this isn't news to most of you) and others are holding. He said: "they're holding until after the Olympics", "Okay" I replied. We both laughed.
What's even funnier: there are two towers going up on either side of this building. One is it's phase II and the other is a different developer. Most of those presales are already sold, at least enough for the developer to finish them off. Meanwhile, along the same corridor of buildings,there were sales signs stacked to the ground on several posts out front.
July 2nd, 2008 at 5:01 pm
In other news:
The S&P/TSX composite index retreated 432.92 points to 14,034.11.
"The primary reason here is simply that there seems to be a disappearing level of confidence in our market," said Fred Ketchen, manager of equity trading at Scotia Capital.
"Confidence has declined in the ability of our economy to maintain its head above water, many people are growing to believe that a recession in the U.S. is probably well-established now and the spillover into the Canadian economy is going to be more severe than many had figured."
July 2nd, 2008 at 3:55 pm
Actually if any one Canadian town is more staggeringly self-absorbed and self-regarding than Vancouver it has to be Victoria. Market declines will come as a greater shock to the pampered boomer retirees there than in the lower mainland.
July 2nd, 2008 at 3:26 pm
"The Dow closed today at 11,215, down more than 20 percent from the October high, officially making this a bear market."
- ABC news
How does that ring, "Officially… a bear market."
How long before they say that about Vancouver Real Estate? A year? Two?
July 2nd, 2008 at 3:23 pm
"Everyone wants to live in Victoria. It’s the Hawaii of Canada and everyone knows it."
I know you're just being ironic. It's especially funny because the real deal Hawaii is starting to tank. Sales are the lowest they've been in 10 years.
July 2nd, 2008 at 3:20 pm
Victoria is the Florida of Canada and everyone knows it. All the canadians want to retire in Victoria (even though most of them buy in Flordia). RE in Florida is a blood bath. Victoria will be the same.
By the way, Victoria is a cold, rainy dump. Anyone would choose tropical florida. Hundreds of thousands of Canadian snow birds are a testament to that fact. No one has coined a term for "everyone" that wants to move to Victoria because not many people do. Florida is where everyone buys and it is still tanking.
July 2nd, 2008 at 3:14 pm
I see no price declines coming to Victoria any time soon. This town is just far too attractive. Everyone wants to live in Victoria. It's the Hawaii of Canada and everyone knows it.
July 2nd, 2008 at 2:52 pm
My apologies, but you had no other posts in this thread and I am so sick of stupid bulls saying that very statement and meaning it… The best advice for investment is always be aware of you surroundings… The writing is clearly on the wall.
July 2nd, 2008 at 2:38 pm
Disbelief said:
"This is probably one of the stupidest bullish statement. The nation is spending money at an alarming rate, More than we make. This contrary to what you say is going to be the catalyst of this market. Sometimes sellers have to sell it is Buyers who don’t have to buy… Moron"
Ahem, I am a bear. Read my past posts. This is the rediculous bull argument that was made repeatedly on Friday. Just restating it for sarcastic posterity. I'm glad you see the idiocy in it.
July 2nd, 2008 at 2:30 pm
jesse: Better yet, just tell your landlord you'd be happy to sign a two year lease on the place so that he can stop worrying about cash flow
I just did this with my landlord, who happily obliged to extend our generous 2% cap rate.
July 2nd, 2008 at 2:02 pm
Not to mention that if you stuck in money into RE for an investment and you see that value drop, you're going to want to pull out and put your $$ into something else that will give you a positive return. So if the market does take a downturn, you can safely assume that investors are going to want to pull out and maybe even buy RE in the US where the market is getting close to bottoming out (since the stock market is still heading downwards).
July 2nd, 2008 at 1:53 pm
a good read by Garth Turner:
http://www.greaterfool.ca/