Vancouver Condo Info

There’s an article in the Vancouver Sun today filled with cheery forecasts for 2009, The title is “Good economic news: 2009 is only 12 months long“.  Here are a few select quotes, but it’s worth reading the whole thing.

“The thing to keep in mind about 2009 is that it will end,” Jock Finlayson, executive vice-president of the Business Council of B.C. said in an interview, “and we’ll get on to 2010, which is going to be, hopefully, a much better year.”

..and Helmut Pastrick says:

“I think [2009] is just going to be one of the worst years we’ve seen in many years,” Pastrick said.

He said it will perhaps be worse than the province’s last recession in the early 1990s, though probably not as deep as the 1981-82 downturn.

On Housing:

The decline in provincial housing sales and new-housing construction starts will be the most noticeable impact of B.C.’s slowdown, Pastrick said.

TD Economics has pegged total sales in B.C. at 60,600 units for 2009, a decline of nine per cent from its estimate of 66,800 sales by the end of 2008, which is itself a 35-per-cent fall from 2007.

What about employment?

“I think we’ll see a rising tide of layoffs in industries like retail and tourism and housing,” Finlayson said.

TD Economics estimates that B.C. unemployment will average 5.3 per cent in 2009, up from an average of 4.5 per cent in 2008.

However, Pastrick said job losses in construction might become steeper later in 2009 as housing units already under construction come to completion and big capital projects such as the Canada Line rapid transit project are completed.

All this sounds just a little bit familiar…

Well 2008 has come to a close, and if you’re counting on Vancouver real estate as a ticket to riches it hasn’t been the best of years.  But DO NOT FRET, for I have discovered a simple way for investors to feel a little bit better about the direction house prices took in 2008. Do not look directly at a chart or graph of house prices, instead only view them through a rear view mirror:

There! That’s not quite so bad now is it?

(Yes, we used this same trick when comparing the Vancouver BC / Syndey Australia markets.)

Happy New Year Everyone!

There was (still is?) a great ad campaign down in the United States, called “Real men of genius”, which mock salutes occupations. Listen to some of the ads at this URL: http://thefuntimesguide.com/2004/10/bud_light_real.php

That, and this house that I saw on the MLS, inspired me to write the following “real home of genius” copy.  I hope you enjoy it. I wonder how much this little gem will be worth by the time 2012 rolls around.

Vancouver Condo Info Presents: Real Homes of Genius
(Real homes of Genius)
Today we salute you. Mrs. West-Side Vancouver Development Opportunity
(Mrs. West-Side Vancouver Development Opportunity)

Without you, there would be no need market for demolition contractors
(Blow it up and start all over!)

Built during the depression-era of the 1930s, you have 2 bedrooms, a bathroom and an
unfinished basement
(Who needs drywall anyway)

You’re “charming” and “intimate”, with character, and your kitchen was remodeled as recently as the 1970s.
(Mahogany rules)

Anyone who buys you, will end up tearing you down just to build you up again. And for the opportunity to do this, you’ll charge them only 1.3million dollars
(Plus 6% commission)

So, pop open a nice cold Bud light, you doyen of dreams, because there’s only so much land in Kits, and you’re nice enough to be squatting on only 33ft. of it.
(Size is over-rated)

-The Dude

As we wrap up 2008, I would like to wish you all a wonderful winter and a Happy $104,725.00 Holiday.  If you went shopping for a house in Vancouver last May but haven’t yet bought, that’s how much you’ve saved so far according to local real estate board statistics.

That’s enough to buy a small house or condo outright in one of the US housing bubble markets of California, Arizona or Florida.

Of course those markets have been falling for the last three years, our prices have been dropping for less than six months.  What will Decembers stats show? What about the New Year?

At this point some people are very concerned about the state of the economy, both globally and locally.  I do believe we’re headed for some leaner economic times, but it’s worth keeping perspective.  If you’re reading this website from a warm dry location with a comfortable place to sleep and food to eat, you’re doing ok.  You don’t have to go far in Vancouver to see people that are doing a lot worse.

Enjoy your extra $104,725 and have an excellent New Year, I have a feeling that 2009 is going to be very interesting.

CZ suggests the following poll:

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Now that’s progress!  Click the image to view the full-size original.

-Arit

Although it seems still far away from the bottom right now, the RE bears on this site are looking for the days to transition to bulls when Vancouver RE is restored back to fundamentals. A common understanding (or the RE bear sentiment) is that after another one or two years deep dip, the market is likely to level down for a while. The bears then may start shopping around.

To prepare for that, buyer’s strategy needs to be considered. One of the main issues is whether to use a buyer’s agent or not. There are around 10K local Realtors (can someone provides the exact number?) – some of them are very experienced professionals that would help buyers a lot on one’s biggest purchase in life, while some others may just be con-men collecting commission only, or even worse, misleading/pushing the buyer for quick commission. A buyer’s agent does not necessarily have their interest aligned with the buyer’s when it comes to commission. This leads to the question on the poll “Are you going to use a buyer’s realtor?”.

I have listed some pros and cons of using a buyers agent here to start our brainstorming.

Pros:

1. Inside information. Some of sales information are only available to realtors (this may be worth talking about as another topic).
2. Expert advice. Get advice on various aspects, such as pricing, RE trend, construction quality, history, surrounding info and neighbors. Assuming you are lucky with a good realtor.
3. Safety. Feeling that the deal is “verified “/”protected” by a professional – may be purely sentimental. But most likely you do get less speculation on the decision making. Realtor does have to adhere to the Code of Ethnics, dealing with them is supposedly to be secured and you may have opportunity for recourse if you suspect their behaviors.
4. Less hassle. Free you up on most of the hunting job, paper work and other formalities/hassles/complications.

Do you plan on using a buyers agent?

• No, I'll do it myself
• No, but I'll use the seller's realtor for the paper work
• Yes, but I'll negotiate the commission
• Yes, I'll pay the full commission

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Well, I made it a week without posting, and I’m encouraged by the way that readers have stepped up with story submissions.  No one seems to be interested in doing the Friday Free-for-all, and I’m not sure it’s a tradition I want to let vanish yet, so here goes:

-Vancouver rises in economic ranks, Regina is #1
-Canada could face six years of deficits
-Warnings of risky mortgages ignored
-What ever happened to $200 / barrel oil?
-Toronto condo boom heading for bust
-Bush considers ‘orderly’ autos bankruptcy
-Grim choice: walking away from a mortgage
-Harper concedes possibility of depression

So what are you seeing out there? Post your news, links and thoughts here and have an excellent weekend!

note: any conversation on Vancouver, real estate or economics is allowed, please keep it civilized. When posting articles please only quote pertinent points and link to the original instead of pasting the entire article here. Pasting a link into your comment will automatically create a clickable hot-link.

Preface: I had already written my post when I began a discussion with a co-worker of mine late in the afternoon. We began to talk about real estate prices (on Bowen Island, where she has family) and it was obvious that she had no clue about anything to do with real estate. That, however, didn’t stop her from affirming with the utmost certainty, that “we’re in a lull, and by the spring prices will start back on their inexorable climb.” Just then a co-worker jumped in claiming that he was going to wait until after the Olympics (about 2 years) to buy. When I told both of them that I expect a bottom in real estate prices (real prices, if not nominal) around 2014/2015, they looked at me like I was nuts.

I just smiled knowing that this is exactly what my friends/acquaintances in the US were thinking about 3 or 4 years ago. They no longer think I’m nuts and one or more of them e-mails or calls every couple of days to get my opinion on the real estate market. Well, here’s my original post below:

A native Vancouverite, I had lived abroad (in 4 different countries) for 13 years before returning to Vancouver this summer.

I have never personally owned real estate, but growing up in this city I was a casual observer of the manner in which my family’s (and friends’ and neighbours’) fortunes were party to the vicissitudes of the Vancouver real estate market. I saw my parents purchase a home on East 19th ave and Clarke Drive for $33K in 1973, tear it down in 1989, build a new home there and sell it for abou $500,000 (in about 1990), which my parents used to buy a building lot (right near the top of the market). There they built another home, the cost of which took the remainder of the profit from the sale of the earlier home, even though labour costs were mostly free (our labour, not counting opportunity costs). Then I left Vancouver and have watched at a distance as prices reached truly astronomical levels in this city.

As I stated earlier, I don’t own any real estate, but I began my long journey into trying to understand what was going on in the world of real estate in about 2003, which is about the time I started to seriously consider buying a home in the northeastern US (which is where I was living at the time). I thought that I could buy a 2-3 bedroom house, rent out a couple of the bedrooms and have my roommates help pay my mortgage. But when I started pricing things out, I realized that it just didn’t make sense financially.

My gut (and my analytical nature) were telling me that something was wrong. What’s more, I had moved to the US from Europe (where I lived for about 4 years) and just could not believe the amount of new cars on the road; something just didn’t add up and I couldn’t understand how I, who was making about the median wage for the area in which I was living, couldn’t even come close to comfortably purchasing a home, while families (not individuals, but families) whose gross net income could not have been much higher than mine at the time, were out purchasing four-bedroom McMansions so that they could park their two cars–one of which was obligatorily an SUV–in the driveway.  That’s when I had to find out what the hell was going on…which led me to various “bear” sites on the Internet. I then realized that I wasn’t the only one who thought like I did…

That’s when I found the one-word answer to the dilemma: Debt. In fact, it was insane, “you’ve never seen anything like it” levels of debt that individuals/families were taking on without seemingly the littlest regard for a strategy of how they were going to ever pay it back. Everyone (and his two-year-old son and pet cat Wheezer) was going into debt at a rate that I just knew was not sustainable.  So, I’ve been a housing bear since about 2003…

That doesn’t mean that I’m a natural “bear”, but I’ve been aware of the unprecedented amount of debt that is weighing down the balance sheets of families, companies and governments worldwide and which still have to be resolved in some manner before anything like a sustainable recovery is in the works. I think this will take years, rather than months…

What about you, what are the specifics of your own personal “awakening” with respect to the real estate market in Vancouver (or any other city)? Did you know that the realtor mantra “real estate only ever goes up” was b.s., or did they have you fooled for a while? When/why did you begin to think that most Vancouverites were nuts and deluded about the value of our real estate?

-The Dude

Sorry to end the love-fest that is the last post, but the news waits for noone.  Today the Globe is reporting that Housing sales hit a 20-year low.

The selloff in real estate has morphed beyond a correction of overheated individual markets into a broad national slump, with prices posting their worst decline in nearly 20 years in November.

In the face of a collapse in consumer confidence, the number of resale homes sold in Canada plummeted by 42 per cent year-to-year to 27,743, the lowest level since January, 2001.

I haven’t followed Benjamin Tal’s comments as close as most here, but I’m guessing his tune is changing somewhat:

This is clearly a market that is extremely risk averse, and this is not the ninth inning of this game, this is just the beginning. I think that any hope of a quick turnaround … is misguided.

Housing sales hit 20-year low as real estate slump widens

-ReductiMat

Now that the correction has started, the only questions that remain are its depth and when we get there. Or more simply, when does one buy?

There are a lot of different ways of evaluating real estate prices and many of us are aware of the traditional metrics. I won’t repeat this analysis because it has been said before and is readily available. Most results would place fair value anywhere from current levels to another 20 to 30% on the downside (and even more by some).

Another way of evaluating expected prices is technical analysis, which is simply looking at past trends and assuming history will repeat itself. Real estate has appreciated at approximately 5.5% per year over the long term. Using 1983 prices (the bottom of the last crash) as a baseline, this would give an expected bottom of $630k for the average Greater Vancouver SFH. Using a similar approach, fair value was estimated at $730k, not accounting that markets tend to overshoot fair value. Considering this, I think $630k is a reasonable expectation for the bottom (based on technical analysis).

Based on the November 2008 average SFH prices of $750k, I think we have another $120k to go on the downside, or roughly another 15% drop on top of what we had to date. Considering the rate of the correction, it shouldn’t take long for us to get there. It might only take another 6 months.

But with all that said… who cares? Why are so many people consumed with buying at the absolute bottom? I think we are asking ourselves the wrong questions because none of us really know where the market will go (a known unknown). I think the following three questions are more important, partly because they can be answered (known knowns):

1. Can I afford it?

2. Do I like the product and the location?

3. Will I live there for a reasonable period of time (at least 5 years)?

If the answer to all these questions is yes, then it just might be the right time for you to buy.

Dave