May 2009: prices up and down
The Vancouver Sun is reporting that the housing market in the lower mainland has struck a balance point, with sales and price rebounding from their winter lows.
The decline of Lower Mainland real estate markets, which started with falling sales more than a year and saw prices drop as the global recession developed, levelled out in May.
Metro Vancouver recorded its best year-over-year sales increase in May since February 2008 with 3,524 sales reported through the Multiple Listing Service, 17 per cent higher than the 3,002 sales recorded in the same month a year ago.
The so-called benchmark price in Metro Vancouver, averaged across property types, hit $506,201 in May, which is still 11 per cent below the same month in 2008, but higher than the $484,211 recorded in January.
Metro Vancouver’s inventory of unsold homes in May stood at 13,641, a 16-per-cent decrease from a year ago.
At the risk of repetition, I’m just going to post one of our favorite charts from Sacramento Land(ing) showing their market going through the seasons over the last three years:
And here’s the up to date version they just posted:
June 4th, 2009 at 10:52 pm
Commodity prices are rising, Goldman Sachs predicting $85/barrel oil in 2 months, stock markets continue to climb, inflation ready to set in, get real, middle class workers will never get a sniff of properties in Vancouver West. I rather keep them away from the West side since the middle class in Vancouver are narrow-minded. Best they can do is live in burnaby. Burnaby is a dump.
June 4th, 2009 at 10:49 pm
The people on this site are getting more and more desperate in hoping for a market meltdown in real estate. If it hasn't fallen, it ain't going to fall boys and girls. Keep on hoping to get your hands on a cheap piece of land. I can bet anyone that by this time next year, you'll see housing prices higher by at least 10%.
I'm about to put an offer on a 1.475 million dollar home near kerrisdale. I'll rent it out for the remainder of the year and take it down next year. I think I should be able to list a new home on that land for at least 3.25million to start.
June 4th, 2009 at 10:15 pm
gvrdpropertyowner: "Nevertheless, the inference was (correct me if I am wrong) that if one knows the base population, one can then reliably, and accurately, predict the level of new construction which is required to house that population."
No he is inferring that population growth is reasonably consistent so there should be a relationship between base population and housing starts.
Whatever, though. As mentioned, dwelling growth should be around 10,000 to absorb in-migration. Most demos that destroy existing stock make way for higher density properties so likely no help there.
June 4th, 2009 at 8:24 pm
Sorry this might be off topic. But could this be the cause of 2nd wave of the global economic crisis?
<a href="http://www.telegraph.co.uk/fin…..weden.html” target=”_blank”>http://www.telegraph.co.uk/fin…..weden.html
Yes. That and potential failed UK and US bond auctions.
June 4th, 2009 at 7:43 pm
realpaul:
The government is setting up these ideas so that they can move legislation and zoning wish lists submitted by the development community for the benefit of the politicians and development community.
The more excess supply that is built, the better it is for the buyers and the worse it is for the sellers.
Build baby build.
June 4th, 2009 at 7:27 pm
V:VB2,It is written.
Hey Vancouverrrrrrrr-Jai Ho!
baila! baila (Dance!Dance!)
Come on,Come on my life Under the canopy
Come on,come on under the blue brocade sky!-Jai Ho!
vancouverboom2 success
runing like a fire
every buyers/sellers entering,ticking the prices higher-Jai Ho!
come on bears stop coming in my way
Longer you'll wait larger you need to pay-Jai Ho !
"*TriumphHhhhhhh -Vancouverboom2-Jai Ho!*".-
It's getting hot and hot in here in Vancouver where all buyers include first time,second time buyers along with buyers from usa,uk,europe,and overseas have been buying and cheering on the crash of fear that proved to be dumb theory when it comes to apply on Vancouver,Different planet!.No more down turn in decades to come in the "best place on earth".Everyone wants to live in Vancouver to develop themself in most decent multicultural society of this world,Who says you can't ? han? Vancouver Real Estate, Rock Solid Heart Touching!!!!!You don't know? What a joke sheesh!Just bring in your suit case and you are good to shoot the numbers UP(/).So buy without fear and buy everywhere in Vancouver because hey Vancouver real estate,Vancouverboom2 with it's extreme speed and countinue strength "The Vancouver Real Estate Consumer Confidence -Jai Ho!".Virtually poised to never go down.-
June 4th, 2009 at 6:58 pm
An idea some may want to consider regarding the projected pop growth. The vast majority of new immigrants are poor and have a social and cultural propensity to live together as very large extended families in a SINGLE unit. This would indicate that condo's will not be of intrest to the majority of new purchasers. I know families who convert thier garages and concrete over the lawn as opposed to all moving out on thier own. Based on what I see, you can cut the number of projected units needed by pop growth by a factor of ten at least. as always the city planners have thier head up thier asses. The government is setting up these ideas so that they can move legislation and zoning wish lists submitted by the development community for the benefit of the politicians and development community.
June 4th, 2009 at 4:56 pm
Anon "I think that’s exactly what he’s stating. Do you see a flaw with this methodology?" "seems straight-up on first glance and starts would tend underestimate dwelling growth due to demolitions. Population growth is x, r people per dwelling, so dwelling growth needs to be x/r."
Ignoring the effect that changes in the total population have on housing requirements.
Certainly, X people would require Y housing. However, I believe that the required replacement- of said housing- would be a function of the age and condition of the housing; and, in turn, how it relates to the current and future needs of the population. Does the gentrification of B.C.'s population have an effect on housing? As such, knowledge of the total population is only useful if it can be used to prorate the results from other know populations- if they are similar.
Nevertheless, the inference was (correct me if I am wrong) that if one knows the base population, one can then reliably, and accurately, predict the level of new construction which is required to house that population.
Let's use an example. Russia has a population of ~ 140 million; therefore, Russia need to build 140,000 homes this year. Uganda's population is ~ 31 million; therefore, Uganda should build 31,000 homes. Does this accurately describe the housing needs of these two countries?
The level of construction activity is material, in that, it indicates future supply; and,more importantly- future jobs.
However, I agree, low yield rates are, probably, the most concerning variable to bulls. Although, I have never done the research, I would not be surprised: if one could purchased a million dollars of real estate in a place such as Phoenix, and live(rent) in Vancouver for free (using the income from their investment properties).
Anon, you and I might have different- and legitimate- interpretation of the same data- who knows. However, BS is BS.
This blog will become a waist of time: if I have to spend time checking the validity of the data, which is used to support augments; and, contemplate (intentionally?)dubious logic- I think I will go outside.
June 4th, 2009 at 4:51 pm
Sorry this might be off topic. But could this be the cause of 2nd wave of the global economic crisis?
http://www.telegraph.co.uk/finance/financetopics/…
June 4th, 2009 at 4:25 pm
"methinks Dave is a glutton for punishment."
methinks an echo chamber is boring (how many ways can you say "look out below"?), so props to Dave for making people justify their positions and at least keeping some sort of dialogue going.
Disagreeing with the consensus isn't being a troll.
June 4th, 2009 at 2:17 pm
oneangryslav,
Unfortunately, Octo-mom and Brangelina earn more advertising revenue than good, in-depth, critical financial reporting. Developers and realtors have money to spend on advertising. There's not much incentive to be a great reporter anymore, which is too bad.
Blogs are great, but we need some trustworthy larger organizations who have the resources to track complex difficult stories and put a national spotlight on them. All these bailouts, development deals and corrupt CEOs should be hammered by the press, and it's not happening…just a lot of soundbytes at the moment.
June 4th, 2009 at 2:04 pm
Pope, please can you delete Franco's post? It's inappropriate and racist. Thank-you.
June 4th, 2009 at 1:59 pm
Franco:
Wow. I'm convinced. I'm going to spend the hundreds of thousands in my savings on condos now. You're logic was ironclad.
Fail.
June 4th, 2009 at 1:43 pm
On another note, the rental market is seeing tons of new listings these days, I was surpised by how many. I haven't looked in a few months, and was shocked last night to see how many great buildings have shown a significant increase in listings. I'm looking at one and two-bedrooms in Coal Harbour and Marinaside and saw several of my target buildings going from 1-2 units available a few months ago to 10-14 units listed now; as well, several are offering nice incentives. This is all the more surprising b/c summer is usually the tightest time of year.
June 4th, 2009 at 1:13 pm
ella: You're right about the writing; the reporter doesn't have a clue as this means nothing for those who can't complete because the market value of their pre-purchase has dropped.
You know, one would think that those writing about such issues in a prominent mainstream media outlet would actually have some idea about the subject matter. But I guess that's too much to ask as they didn't go to school to become experts on a particular topic, but to become "reporters." I wish that journalists would trademark "Reporter" the way that realtards have trademarked Realtor. Then we could pre-emptively dismiss what they write.
June 4th, 2009 at 11:44 am
Ted Says:
June 4th, 2009 at 11:29 am
"Sounds like MAC dropped the ball on this one and it sounds like an isolated incident"
I can tell you similar situations have come up in several projects in Greater Vancouver already, so it's not an isolated incident. But also, it's not like I expect an avalanche of these either.
June 4th, 2009 at 11:33 am
Dave is right and have courage to confront those silly and ignorant bears who missed the boat yrs ago.
They shameless, divert their frustration and anger toward anyone who has contrary option.
As I always say, Van is a unique city and its Chink population is the main pillar of Van RE.
Chinks will sustain Van RE alone for the yrs to come in next century though there are always hiccups during the run to the heavenly peak in which house owners are secured for abundant retirement while those bear will certainly live in poverty, regret, agony,repentance and of course, anger.
June 4th, 2009 at 11:29 am
Sounds like MAC dropped the ball on this one and it sounds like an isolated incident
June 4th, 2009 at 11:14 am
"The decision could have implications for hundreds of buyers who purchased condos, only to find their value had fallen in the current real estate market, so they failed to complete their purchase and now are being sued by developers."
—Vancouver Sun
Interesting. Terrible writing, though.
June 4th, 2009 at 9:46 am
B.C. court rules pre-sale condo contract invalid
http://www.cbc.ca/canada/british-columbia/story/2…
I can tell you everyone in my office, and other banks in the city, are worried about this type of thing, we have seen alot of sloppy papering.
June 4th, 2009 at 9:04 am
http://www.bcstats.gov.bc.ca/data/pop/pop/mun/Pop…
June 4th, 2009 at 8:48 am
Non-residential sector has been touted by the construction industry as being the next boom in BC. The next wave of construction to keep them all busy and profitable along with infrastructure.
Well, non-residential building permits drop 36.5% in value in BC for April.
What will they think of next?
June 4th, 2009 at 7:54 am
Dave: The point is that the current volume of real estate under construction doesn’t appear to be very alarming when one considers historic construction rates (per pop.) and population growth.
Over the last 5 years in greater Vancouver, housing starts have been running 18-21k/year, while population growth has been about 26k/year. The average number of residents per dwelling is 2.43. The number of new dwelling needed per year for this population growth would be: 26k/2.43 = 10,700. Even if you assume fewer residents in condos than SFHs, it still appears there has been significant overbuilding the last 5 years.
Sources: (you should try them sometime Dave) ;^)
Source 1
Source 2
June 4th, 2009 at 7:39 am
Dave: "That’s population growth for BC but most of it ends up in the Lower Mainland."
Do you have data to back that up? Check out the BC Stats population estimates (PDF). Combining Greater Vancouver and Fraser Valley and I only get between 30K and 38K annual population growth since 2000.
So much for most of the population growth being in the Lower Mainland.
June 4th, 2009 at 7:04 am
gvrdpropertyowner:
That's population growth for BC but most of it ends up in the Lower Mainland. The point is that the current volume of real estate under construction doesn't appear to be very alarming when one considers historic construction rates (per pop.) and population growth.
This is what 60,000 people looks like:
http://tinyurl.com/o3lctj
June 4th, 2009 at 2:00 am
Dave is nothing but a troll
ignore it
as they say
if you don't get hte joke you aren't in on it.
Dave is the joke. If you aren't laughing you've been punked.
google it
June 4th, 2009 at 12:37 am
gvrdpropertyowner: I think that's exactly what he's stating. Do you see a flaw with this methodology?
It seems straight-up on first glance and starts would tend underestimate dwelling growth due to demolitions. Population growth is x, r people per dwelling, so dwelling growth needs to be x/r.
Note dwelling growth is not the same as completed units if houses have multiple suites. OTOH condos are much more common now than they were and they tend to be 1-2 bedrooms which would tend to decrease the number of people per dwelling.
In short, while there is a looming oversupply I am not sure there is to the extent seen in some of the US cities. It is a sidebar to the real problem: high prices and low yields.
June 3rd, 2009 at 9:43 pm
Dave "The long term trend is about 10 housing unit starts per 1000 people."
Are you positing that the base population of a region is a variable which has a causal relationship to the number of necessary new housing starts?
Dave "Another thing to consider is population growth which is 60,000 people per year."
Are you suggesting that this data is a representation of the average annual population growth within the GVRD? And; therefore, can be legitimately divided by the average occupancy rate for the lower mainland to determine the need for additional housing in the GVRD?
June 3rd, 2009 at 9:15 pm
methinks Dave is a glutton for punishment.
June 3rd, 2009 at 9:01 pm
Dave
"Freako? Isn’t he the one who called a top in 2004?"
Could be, how is this relevant?
June 3rd, 2009 at 8:59 pm
What on earth are you smoking Dave?
I didn't predict continued inventory growth in the Fall and I did predict our current spring bump.
I can't go around denouncing every opinion I disagree with, I don't have the time to waste or the inclination. Simply because I didn't disagree with a position does not mean I support it tacitly (it's tacit by the way not tacid, tacid sounds like some kind of new drug) or not because I haven't weighed in on the subject. The very fact that you bring this up again after I showed you that it is irrelevant proves that you're being dishonest.
You haven't denounced Hitler yet. You must be a Nazi.
June 3rd, 2009 at 8:47 pm
Dave:
In any case, I would argue San Fran is a better city to compare Vancouver with that Sacramento.
Is that the same San Francisco that Case-Shiller now shows to be 46% off peak, or are you talking about another one?
http://www.calculatedriskblog.com/2009/05/case-sh…
June 3rd, 2009 at 6:15 pm
one lucky buyer.
June 3rd, 2009 at 5:45 pm
and your tacid support
the word you want is: flaccid
you may want to discuss this in a different forum….
June 3rd, 2009 at 5:37 pm
Daves income went from $8.75 to $9.10 woooo hoooo! now you can afford to latte's a day while you sit in a cafe being a troll!
June 3rd, 2009 at 4:32 pm
Drachen:
Freako? Isn't he the one who called a top in 2004?
June 3rd, 2009 at 4:30 pm
Drachen:
So in your mind it makes sense to attack somebody who's call missed the top of listings by only 500 to 1000 units and by only a few weeks? Yet, predictions by many of continued inventory growth through the Fall receive no commentary and your tacid support. So much for intellectual honesty.
The reality here is that my predictions have been mostly correct. It seems to me that you chalk up all your bad calls under the wider heading of 'greater fools'.
June 3rd, 2009 at 4:18 pm
Dave
"Oh… weren’t you the one who said nominal wages wouldn’t grow faster than inflation?"
Um, no. Sounds more like something Freako might say, he's more into the general economy stuff.
But thanks for playing!
"I don’t recall you shooting down those predictions at the time."
I didn't support them either, are you going to start attacking me for every position I didn't deny now? "He didn't denounce Hitler, he's a Nazi!"
Get real.
Bring a rational argument supported by real data that you haven't cherry picked for bits that support your ideas or stop pretending to be intellectually honest.
June 3rd, 2009 at 3:44 pm
I was just watching BNN and they mentioned that debt defaults are rising for Canadians.
June 3rd, 2009 at 2:30 pm
Dave: "Overall, I don’t think the housing start data is going to result in price decreases."
Again, it doesn't matter for where prices will end up. Excess inventory will accelerate price reductions but will not prevent them unless rents rise to where property becomes a good investment again. The only sure-fire indicator of tight housing supply is when rents are being forced upwards. Right now this is anything but.
Also I am seeing significant underutilisation of existing housing stock. As unemployment creeps up, look for existing housing to be used more efficiently, i.e. population per dwelling will increase.
June 3rd, 2009 at 2:08 pm
VanBanker:
Look at the graph for under construction numbers for Greater Vancouver from CMHC. We’ve only come down from about 26,500 to 24,500 and prices have already dropped ~ 15%. Not only that, but there are still new starts every month. All of those units will keeep hitting the market over the next two years, and prices will drop significantly more.
I had a look at the long term housing starts (going back to the 50's). The long term trend is about 10 housing unit starts per 1000 people. With 4 million people in BC, a sustainable level would be around 40,000 units per year.
Another thing to consider is population growth which is 60,000 people per year. The amount of real estate under construction right now would just be enough for new people.
On top of that, housing starts are WAY down as you point out.
Overall, I don't think the housing start data is going to result in price decreases. If anything, we might have a shortage in a couple years.
June 3rd, 2009 at 2:00 pm
jesse:
It sounds like we agree then. I don't think MOI says too much about long term price trends.
June 3rd, 2009 at 1:51 pm
Dave: "You might be interested to know that average wages (Apr 08 to Apr 09) are up by over 5% YOY."
5% up for who? Those who still have jobs?
June 3rd, 2009 at 1:50 pm
Dave: "Mohican did a lot of work on this and I recall his number showed something like a 3 month price lag."
Actually the numbers showed the highest correlation between price changes from 6 months ago and 3 month moving average MOI. There is no lag per se between MOI and price changes — the 3 month moving average was used to smooth out seasonality and improve the correlation, not to implement a lag function — and in fact the correlation weakens as MOI is used to "predict" future price movements. See the post here.
"MOI doesn’t predict the rate of change in prices. Where do you get that idea?"
MOI is correlated to changes in price. It is therefore a "predictor" of price changes. The relationship has held up well when MOI was high last year and I see no reason for it not to continue when MOI is low again.
It is no surprise prices are increasing with low MOI. I just don't see any data to support current MOI as an indication of a long-term price trend beyond the summer.