Bloomberg on Vancouver housing slump
It looks like Vancouver’s housing slump is starting to get attention from outside Canada. Several people pointed out this Bloomberg article about our declining real estate market.
West Vancouver builder Sean Hanley thought Canada’s real estate market would be immune to the housing recession that sent values tumbling in the U.S. Then the economy slowed and oil prices fell.
The price of a detached house in this upscale community fell 22 percent in October from a year earlier, helping to drag the average residential price in Canada down by 9.9 percent, the biggest decline in 26 years, according to the Real Estate Board of Greater Vancouver and the Canadian Real Estate Association. For Hanley, that’s meant nary a buyer for his five-bedroom home.
“It’s been a little bit surprising the consequences of the subprime crisis have been so far-reaching,” said Hanley, 48, who has cut his asking price to C$3.99 million ($3.26 million) and is now offering a C$100,000 bonus, on top of regular fees, to the agent who delivers a buyer.
This isn’t the first time we’ve seen offers of a bonus to the buyers agent instead of a price reduction, but I’m a bit suprised that it’s acceptable to openly pay the buyers agent to represent the sellers interest. Is this even an effective technique?
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November 21st, 2008 at 1:08 am
Even as the probability that Vancouver housing sinks at least 50% peak to valley, I have an anecdote, a silver lining of sorts, that refutes conventional negative expectation.
The going wisdom is, that as homes rapidly depreciate, the “wealth effect” is lost and these homedebtors stop buying consumer goods, thus hurting the local retail economy.
But in my experience — four friends with expensive homes in West Van, now down 20 – 25 per cent — negative equity won’t affect their spending because all four couples were maxed out on their resources to even be in those homes to begin with; they have not been spending like good little profligate consumers since Day One. So where is the loss? I suspect Vancouverites as a group have been so overly invested in their inflated homes that they have not been big spenders on anything else for some time. Indeed most stats show Vancouverites’ spending lags that of places like Calgary and Toronto.
So — could the Great Real Estate Implosion in Vancouver co-exist with a merely flatlined local economy with no real consumer-led recession to be seen here?
November 20th, 2008 at 10:56 pm
#131 – seeing the price per square foot drop is more likely a reflection of the mix of sales changing (favoring cheap small units over those missing west side homes). I believe Maggie’s blog had a good breakdown of the changing distribution of closures (at least downtown):
http://www.vancouverreflection.....#more-1059
I’m not saying it isn’t going down, but I have a hard time believing it’s falling that fast.
November 20th, 2008 at 10:22 pm
Here’s a sneak peak at a story you might be seeing in the next few weeks: a friend of mine who rents in Spectrum 4 told me one person rented close to 30 suites in the building and sublet them. He pocketed 2 months of sublet rent, not paying rent himself of course, before skipping town.
If the story is true, let’s hope the MSM picks it up. Sounds like a great leader. Remember: you heard it at VCI first.
November 20th, 2008 at 10:16 pm
LOL. Well said, except that Mish is not a lunatic gold bug.
Well he is actually, but he has still been right about a lot of other things.
That’s one reason I read his blog actually. If someone with such a different macro perspective from me agrees with me on things like RE we must both be right.
November 20th, 2008 at 10:00 pm
PaulB’s latest stats for SFH have the median price less than $600K for the last 4 days. Three days are in the low $500K range. Here’s the numbers from the last 5 days:
Nov 20 $538,500
Nov 19 $510,000
Nov 18 $536,000
Nov 17 $585,000
Nov 14 $785,000
Admittedly, low sales volume makes analysis difficult, but the trend is showing. A month ago a sub-$600K day was rare. Three months ago a sub-$700K day was rare, and sub-$600K never occurred. When do we hit our first sub-$500K day?
These are the prices that are selling now. Only a few $M places sell to the uber-rich. And there are very, very few of those. And they’re not gonna buy in East Van. It’s gotta be the most difficult and painful thing for the east van flipper to realize this.
The realtor.ca website listings map shows listings all over the place and it’s the end of November.
And yet the denial continues. I’ve got a colleague who scoffs EXACTLY like Peter Schiffs critics do when I foretell a big crash. Of course, he did buy his first condo in Yaletown this Spring.
The Peter Schiff video (again):
http://www.youtube.com/watch?v=2I0QN-FYkpw
BTW I love the way Peter’s first critic is some arrogant economic advisor by the name of “Art laffer” As in “Laugher”. Reality surely is stranger than fiction…
November 20th, 2008 at 9:38 pm
GTA home resales crash in November
Toronto has its own Maggie
http://www.thestar.com/Business/article/540073
“Toronto Real Estate Board president Maureen O’Neill.”
“I think we’re into a real consumer confidence problem. All the economic fundamentals are sound, but people are watching CNN and having a wait-and-see attitude. When they’re listening to all the bad press they’re bound to, we have kind of a collective herd mentality.
“People will start to buy again, and we’ll see the numbers go back up.”
Yes, everything would be just fine, if the media stopped reporting the bad news.
November 20th, 2008 at 9:36 pm
Re: 124 lunatic gold bug blog
LOL. Well said, except that Mish is not a lunatic gold bug. Mish called this deflation/meltdown/crash/whatever you call it very, very well. Mish is well worth listening closely to, unlike our least favourite lunatic gold bug.
And Mish is NOT calling for gold to the mooon!
November 20th, 2008 at 9:31 pm
Bankruptcy houses in West Van mean it is good time for smart investors to buy. At least 20 good deals in just one small area. That means many good deals across GVRD in total. The early doer gets the worm!
November 20th, 2008 at 9:25 pm
Hee Hee
Now which one of you posted this on Craigslist? Abbygirl?
http://vancouver.en.craigslist.....75816.html
November 20th, 2008 at 9:05 pm
This is unreal. Hope Pete made all those bulls eat humble pie, if not i’m sure they’ve lost a shit load of their of their client’s $$$$ to make up for it.
http://www.youtube.com/watch?v=2I0QN-FYkpw
November 20th, 2008 at 9:00 pm
I heard the rumor from a friend of mine who is a stockbroker… he is a serious and outspoken Vancouver real estate bear. He was asking me if I could verify.
There are a few people that I can inquire with but I suspect that even people “in the know” (e.g. the banks etc.) would not exactly be forthcoming with information.
November 20th, 2008 at 8:59 pm
Jesus H. Christ! Go away Randallbard you tool! This is a Van RE blog, not a lunatic gold bug blog. Go post your “money is worthless paper” crap over on Mish’s site with the other tools!
November 20th, 2008 at 8:49 pm
Mish is young and doesn’t have the wisdom that… others who have been in the game for awhile have.
Mish is a boomer in his early 50′s. He sometimes talks about the differences in consumption between when he was a kid in the 60′s and now.
November 20th, 2008 at 8:41 pm
Please keep us posted Mickey Finn. Inevitable this would happen but didn’t think so until early next year. Will ask around at work tomorrow.
Not a bad paper on debt deflation. Sorry about link. In a hurry.
http://www.debtdeflation.com/b.....ion-begun/
November 20th, 2008 at 8:36 pm
What’s the source of that rumor?
November 20th, 2008 at 8:27 pm
42 foreclosure listings in West Vancouver…
This is a rumor that I am trying to verify. Can anyone shed some light on this?
The story goes that various banks gave all the listings to one agent to not cause panic. None are offered at under 2M (for now).
November 20th, 2008 at 7:33 pm
@Randallbard:
“it is becoming obvious that inflation is at our doorstep in a big way, a big Weimar way.”
Well, I don’t think it’s obvious, but I’ll agree with you that it’s one of the two things one should be actively preparing right now to be dealing with inside a decade, yes. The other alternative, which I deem more likely, is a Soviet-level regime of wage and price controls with the foreseeable consequence of the functioning economy being pushed underground.
“the price of gold will rocket much faster than the nominal prices of stocks.”
If you figure that’s a sure thing, you’ve got to explain why from 1980-2001 prices in general doubled but gold fell from $850 to $257. The only inflation hedge worse than gold was silver.
I’m with the theory that gold is a hedge against and predictor of price inflation, but not against monetary inflation. Which is what explains my last paragraph’s observation, and explains why gold is not a good strategy going forward I think.
“I’ll place my bet alongside the 5000-year history of failed paper currencies against hubris of economists who think they have figured out a better system.”
Superficially, this is logical, indeed. What you miss is that for those 5000 years gold was always an accepted alternative currency so debased currencies had a standard against which to fail. That is no longer true. All significant world currencies today are totally fiat and have been longer than almost everybody’s living memory. There is no institutional memory or framework that makes gold more valuable than any other commodity after a breakdown of modern central banking.
No, my planning for the apocalypse is based on the theory that in times of social collapse the only precious metal is lead, if you’re familiar with that euphemism. (If you’re not, let’s put it this way: You buy the gold, I’ll buy the guns, we’ll see who ends up with the gold AND the guns.) And a subsistence farm plot supplemented by fishing and hunting far enough out in the woods to be overlooked in the quite possibly coming food riots once the factory farming sector collapses is the strategy that anyone looking seriously at how close the entire global financial structure is to complete meltdown really ought to be pursuing right now.
November 20th, 2008 at 7:05 pm
2 days ago it price was 915.00CAD. You can follow it on Kitco
However you made my point. The Canadian dollar is losing purchasing power now but as it goes down the POG goes up. It coasts more CAD to buy an ounce of gold. In the US it costs less dollars. So if the CAD is going lower where would you rather be?
Now what if…the USD tumbles and gold goes up in terms of USD AND the CAD doesn’t rise at the same time? This is a distinct possibility in the weeks and months ahead. Still, show me one “commodity” or asset class that is outperforming gold right now besides the USD which generally means higher consumer prices coming. So the choice the way I see it is between holding USD and gold. This is a no brainer unless one is in love with paper with George Washington on it…a REAL relic.
November 20th, 2008 at 7:02 pm
“There isn’t a sector of the economy that won’t feel the impacts but because we have diversified our economy, I think we won’t see nearly the impacts that we might have expected. We’re still expecting to see some small economic growth this year.” Premier Gordie!! For god’s sake where in the crap does this guy live? obviously not in BC we are the most un diversified economy in North America! Construction of Condos and Houses Baby that’s all we are and all we’ll ever be! You wanna see the worst bust in North America we’re gonna put Las Vegas and Miami to shame they won’t hold a candle to us! And how come the Premier lives somewhere else other than BC? He has too cause NOBODY is that damn stupid!
November 20th, 2008 at 6:55 pm
“BTW gold went up again today in CAD to 963.00/oz” And what would that be in YESTERDAYS Canadian dollar? It’s irrelevant if gold goes up in CDN $ if the CDN dollar went down for cryin out loud!!!! ARRRRGGGGHHH!
November 20th, 2008 at 6:52 pm
patriotz
For now gold is holding up better than the market in the current environment of asset deflation. But when the pendulum swings back to inflation (I suspect months not years) the price of gold will rocket much faster than the nominal prices of stocks. I’ll place my bet alongside the 5000-year history of failed paper currencies against hubris of economists who think they have figured out a better system.
November 20th, 2008 at 6:42 pm
read on…..Mish is talking about deflation. So, tell me what kind of deflation is he talking about? Price deflation? Monetary deflation? It’s a big debate and even the experts are stymied. I read Mish’s blog all the time but he’s not right all the time either. Mish is young and doesn’t have the wisdom that say Jim Sinclair, Peter Schiff, Puru Saxena, Steve Saville, Maund, and others who have been in the game for awhile have. But I still read him, he’s sharp. I don’t think hes making an argument for monetary deflation because with the constant stream of past and future bailouts and rescues it is becoming obvious that inflation is at our doorstep in a big way, a big Weimar way. I don’t think that price deflation we are seeing now has anything to do with fundamentals. We are seeing de-leveraging and that is sending prices down along with total fear to spend, both on the part of lenders and consumers because they see their wealth disappearing. I have not seen prices of consumer necessities (except petrol prices) come down..yet but I don’t think they will because price reductions from the source rarely make it to the end user and if business is slowing then where is the incentive for a retailer to drop prices….yet some big box stores do just that hoping to squeeze the last dime out of an exhausted consumer. This strategy always fails and the proof of that is lower store sales and chapter 11′s (Linens and things for one example) as the giants try to split a smaller and smaller piece of the pie.
Anyway I’m betting on runaway monetary inflation, lots and lots of it until it somehow filters down to create jobs that were lost and gets consumers to spend again. I don’t see consumer spending habits returning to last years levels for many years.
Lastly when, not if, the USD tumbles the price of gold will rocket, silver too. Patriotz big mistake is a common one, calling gold a commodity. Its not a commodity, its real money and seems joined at the hip by exchange rates and that is the proof right there.
BTW gold went up again today in CAD to 963.00/oz
November 20th, 2008 at 5:29 pm
Here is a link to the video on this house:
http://www.youtube.com/watch?v=V1ED4ohCZNk
November 20th, 2008 at 5:11 pm
Bearette: You are brave; and a much better person than I am.
When in the same circumstance just recently, I said that the market meltdown is actually favourable for Real Estate.
As I go on, and feed them the BS line that as investors become more disillusioned with the stock market they will gravitate toward real estate, and given that Vancouver is the most desirable place on earth, many of the rich Asians are set to buy in Vancouver, and now may be the last chance for some to get into the market before the world wide exposure we are about to get thanks to the great team at VANOC for bringing the world to us in 2010.
Then I lay it on really thick…..
With the rest of the world in chaos, interest rates will drop further, and that can only help our Real Estate market.
Then a little thicker….
With oil dropping the Alberta oil barons will want to hedge, and with what better than British Columbia real estate? Because we are the California of the north and all the baby boomers will be moving here to retire, we can expect a huge wave on net migration of grey wealth to flock here.
And then I ended by saying…
British Columbia is about to burst at the seams, and if you can pick up an investment property, act quickly because there may not be an opportunity like this ever again.
November 20th, 2008 at 5:05 pm
I was listening to Diane Francis on the radio.
She stated Warren Buffet in bottom feeding mode has no idea of how “low” low is going to be.
November 20th, 2008 at 5:04 pm
RE: the Sun article BDK linked to (#96).
Those asswipes don’t seem to be approving comments. I imagine the bear comments heaping derision on this tripe are lined up like rubes at a pre-sale grand opening.
November 20th, 2008 at 5:03 pm
An early link for Friday.
Lookout Zoomers
Gen-x still hates you
http://tinyurl.com/6nke75
November 20th, 2008 at 4:24 pm
I had a “Vancouver-lemming-psychology-turning” moment today. Forgive me while I bask in it. Shortly after news of the latet stock market dump a colleague actually approached me from across the office to voluntarily seek out my knowledge about “how low the real estate market would go.” Were we at bottom yet? Now this is a minor miracle. I was ridiculed here a scant 6 mos ago. Then avoidance silence for the past 6 months as things turned. Now, sheepish colleagues coming to ask me for my expertise, claiming, they certainly never said real estate only goes up… Safe to say, I put the fear of God in them. No hope till 2011. And even then …
How things have changed.
November 20th, 2008 at 3:56 pm
I see that whisper for the Pope…. oops.
P.S. VANCOUVER REAL ESTATE GOING DOWN HARD
Drachen Says:
November 20th, 2008 at 3:30 pm
I see dead people.
Actually, not really… It just seemed like an appropriate thing to whisper.
November 20th, 2008 at 2:42 pm
Article:
China has closed over 67,000 factories in the FIRST HALF of this year.
(I guess they hid the bad news until after the 2008 Olympics)
http://thecomingdepression.blo.....ories.html
Estimated job loss of 2.7 Million at a rate of 50,000 per day.
If that doesn’t indicate a global economic problem , I don’t know what will.
November 20th, 2008 at 2:27 pm
That fella that had the bonus commission for his multi Million dollar house was on the Global News this morning ( maybe it will be on the Evening news as well )
Not a bad looking house…nice ocean view up the mountain.
Have to at least give him credit for trying hard (or is he getting hard – up ?)…getting all the free publicity. However, the agent from Hasman Realty sure looked like they needed a dermatologist…maybe the stress ?
November 20th, 2008 at 2:26 pm
*edit* I’ve disabled whispers.
November 20th, 2008 at 2:20 pm
that graph was linked from here
http://calculatedrisk.blogspot.....great.html
November 20th, 2008 at 2:19 pm
Buyers Agent bonuses don’t really motivate Buyer Agents. A listing that is priced correctly will. That guy has to bite the bullet and reduce his price!