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House market surging in Vancouver

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RE/Max has just released a report that the Vancouver housing market is surging – I think the gist is that NOW is a FANTASTIC time to buy the product that they are selling.

According to the report, the surge in resale activity can be attributed to three key factors: pent-up demand, low interest rates and greater affordability. “The combination — in conjunction with declining inventory levels — has created heated market conditions in hot pocket neighbourhoods, prompting a resurgence in multiple offers in June. Average prices are holding steady or climbing, days on market are down, and inventory levels continue to tighten, especially at entry-level price points.”

The report stated that while average price is still significantly lower than a year ago, declining inventory levels have been placing greater upward pressure on values.

“First-time buyers are driving freehold housing sales at the $600,000 price point, while those looking at more affordable alternatives are considering condominiums starting at substantially less,” the report said. “Pent-up demand has also been building, with local purchasers and international investors both active in the market.”

I believe this blog and its readers are an example of ‘pent up demand’. Anyone out there bought a house or condo recently?

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G

a bunch of miserable tenants complaining for years and years in their basement suite

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YLTNboomerang

ABC 51:

Berlin is probably one of the most multi-ethnic cities in Europe; in fact, I would say easily more diverse than Vancouver as different ethnic groups are intermingled and do not dominate in geographical areas. I can't say the same for Texas, but this is just one state.

BTW, I am a first generation Canadian and my ethnicity is Eastern European – in Vancouver this means nothing, in Europe I do sometimes experience discrimination.

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mark downs

Greg: It only works that way until house prices hit an inflection point and start dropping back to rent equivelancy. No real investor will buy unless they can make money, so that leaves you with speculators when prices are this far out of whack with rent.

In the US you can still get mortgages for a term longer than 25 years. In fact unlike here you can actually lock in for an entire 30 year term at a record low rate right now, and their house prices are still falling.

For an even more dramatic example look at Japan. They DID have 100 year mortgages and their house prices STILL fell for more than a decade.

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Todd

People here seem to indicate that those that have bought with extremely low interest rates will be effected when the interest rates go up. However, a lot of people will lock in a very low rate for 5 years and will not be effected until their mortgage becomes due in 5 years.

So, the analysis would have to analyze what the prices in 5 years will look like and interest rate at that time. Its all a bit of gamble but no one knows what to expect. 5 years out you could be in trouble or o.k. if inflation increases with the higher interest rate.

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Greg

The people that are buying are all going for 35 year mortgages. When they took away the 40 year mortgages, prices seem to have adjusted downwards a bit. If we only supported 25 year mortgages, affordability will come back to earth. Otherwise, prices will tend to stay at about the maximum of what people can barely afford, assuming they have 2 or 3 home stay students supplementing the income.

If we had 100 year mortgages, we'd have 1 million dollar 400 square foot shoe boxes selling downtown.

The one sure thing is 5 years from now, interest rates are going to be a lot higher than today, maybe even double, but the people that buy now will not have their salaries double in 5 years.

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ABC

betamax said: No? Then what’s up with all the millions of dollars spent on marketing and fluff pieces disguised as journalism?

First off, I'm a bear. However I don't find branding realtors and developers as the bad guys helps anyone. I have family friends who are realtors and they work their ass off. And no they don't try to pump the market. If you've had a bad experience with the realtors you've worked with, it's time to find a new one.

What realtors and developers do in the media is no different than any other industry. Just don't expect the media to bias-free when it is privatized and incentives run amok.

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Anonymous

read on: It's ALWAYS a good time to spend someone else's money. 😉

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betamax

"Realtors and developers do not take advantage of anyone."

No? Then what's up with all the millions of dollars spent on marketing and fluff pieces disguised as journalism?

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goldie

VanBanker writes: "…it disgusts me the way realtors and developers take advantage of the so-called nesting instinct; I have to shield my partner from it as much as I can…."

Realtors and developers do not take advantage of anyone. Developers meet a demand by consumers for housing. Realtors make a living helping people buy and sell properties. It's called a market economy. Libraries are full of economics books; might want to check one out some time.

Do you really have to shield your spousal unit? Are you that patronizing or is he/she encephalitic?

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Mr.Common Sense

Booms lead to busts, and extreme booms lead to what we have now. Therefore, price is always important, no matter how much capital is available or how compelling the story behind the investment is. And it's always better to sell when people around you are greedy and buy when they are fearful.

Just wait a few morew months. The Bust will be fast and brutal.

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patriotzed

patriotzed:

I will take that back. Housing assistance is a taxable benefit, and that benefit is taxable in the year of purchase, no matter where future prices go. But the loss on sale of a personal residence is not deductible.

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patriotzed

read on:

The executive summary of what you said it that it makes sense to buy something if someone gives you the money. Well of course it does.

I was talking about buying with your own money.

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read on

patriotz – actually it can do, if you have time limited access to funds. ie: some companies offer housing assistance to top staff, but only if they buy within a window of time. should one (a) buy, take the assistance, and take the capital loss as prices continue to drop, or (b) forgoe the assistance package and hope that prices drop more than the lost package?

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patriotzed

read on:

70, agreed. it makes sense to buy for a minority, even today.

It never makes sense to buy a capital good such as a house or stock if the price will be lower in the future, unless the yield (i.e. rent/price for a house) is so high that the decline in price is insignificant. In other words, some place like Detroit where you can pick up a nice house for 50K and not care whether the price goes down.

Not here. Not by light years.

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No Longer Looking

70 – a little while back, I found some older condos that were pretty close to rent. eg. a condo that had mortgage/fees/tax at approx. $1000 and might *MIGHT* rent for $800. That was the very low end of the market. Three story, wood-frame, 30-40 years old, in a modest suburb like New West or Coquitlam. (note: mortgage/fees/tax isn't all the ownership costs).

As you go up the market, the difference between ownership costs and rent grows. If you bought anything in your 400K-600K range, there is no way that your ownership costs are anything near the cost to rent. Sorry, I don't see it.

That aside, have a blast if you don't mind paying the ownership premium and seeing your place go down in value. To each their own.

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Starving Artist

Wonder if this impacts the trades at all?

http://www.cbc.ca/world/story/2009/07/14/czech-vi…

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read on

70, agreed. it makes sense to buy for a minority, even today. work assistance schemes, job stability = everyone's situation is different. I find myself needing to buy a place (as a single) in the next 2 years, so will most likely be buyinh in 10 or 11 regardless, but something cheap and suitable for me.

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Long-time lurker/bea

skiff: This is my first ever post on this blog, and thought I should throw my perspective in on this. I am pretty much the FTB described in this article: been looking off and on for a long-time (3+ years), most recently in the range of between 400 – 600k, young, professional, single, very small amount of parental assistance. I had been pretty bearish on the Vancouve RE market, but I ended up buying relatively recently at the low end of that scale. There were a lot of factors at play in my decision to buy, the more important ones being the slightly increased affordability, finally finding the right place at the right price point for me, and recently increased confidence in my job stability. I have not taken on a high-ratio mortgage, did not engage in any bidding wars,… Read more »

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cashisking

One Angry Slav I think you proved my point … I would argue more and more "people" will start to withdraw their support for the U.S. treasury … look at the spreads between Canada and U.S. long bonds. When Canada had a large debt/deficit issue back in the early 90's the same debt that is trading below U.S. yields today was trading 400 Bpts above similar duration bonds. The key for FCB's is too keep the game going as long as possible and make sure every time the music stops that you get a seat. ST bonds have been pushed and held down which can only cause more distortions … the central banks are playing an INCREDIBLY dangerous game right now … I give them a 20% chance of success (I'm an optimist) … Unfortunately they had no option –… Read more »

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Lender

This bounce was started by low interest rate and FTBs. But right now many speculators jumped into the market again. Probably more speculators than FTBs are buying now. I had people buying and tell me they want to sell within two or three years. Lots of them have very low income but big equity on their home. Should I lend money to them? Probably not. But hey I have target to achieve. Even I didn't lend, they can get it some where else. Big banks lending money based on inflated price without appraisal for the project they sponsored. Do I blame them? Hell no. By doing this, they diversified their risk from that one developer (a LTD company) to many individual home owners. I would do the same thing if I lend money to the developer. I predicted many pre-sale… Read more »

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other ted

Limey says"For god’s sake – that’s not the Canada I signed up for, as a nation and as a province, you’re better than that. I expect this kind of rose-tinted money-in-pocket news bending from the rags in the US, but not from BC." Limey I feel your pain. You have are obviously someone who thinks for themselves. There are many that live here or come from abroad that have bought the myth of Canadian responsibility and Canadian compassion and refuse to see this is not the case. This country is just as corrupt as our partner to the states or even more so. There is a certain honesty in the US that things are not alright you will never see any self criticism here in Canada. I business' are probalby even more corrupt as there are no recourses here. The… Read more »

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patriotzed

m:

Some ppl I know seem to be confused and think a end of the recession means everything goes back to “normal”. Gosh a .01% growth in GDP would end it technically, but that sure doesn’t do a thing for joe blow who lost his job in forestry.

Spot on. The early 1980's recession ended in November 1982, but unemployment remained in double digits until 1987, and house prices did not move significantly from the bottom until that year either.

And remember that was a time of low personal debt and declining interest rates.

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realpaul

oneangryslav: #63. My suspicions are that the various fed heads and the minions have come out of the G8 with a plan to shore up the ship of state or at least make it look that way. The propaganda and the announcements have been coordinated. The phones in the back rooms have been ringing I'm sure. Both Flahrety and Geitner spoke today and almost made the same speech. "Recessions over….loooooook green shots…….over there." For Christs sake they just finished announcing that unemployment will be at least higher next year than this. The Parliamentary Budget office forecasts 700K!!!!!!!! Thats 2010 !!!!!!!! What they want is for suckers to come up to the plate so that they don't have to do any of the really unpopular stuff, like cutting spending and showing some restraint. This is a continuation of the plan to… Read more »

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Starving Artist

Vancouver will be different

http://www.calculatedriskblog.com/2009/06/miami-c…

There is no escaping the line of doom (CPI adjusted)

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oneangryslav

cashisking: Lee Adler at Capital Stool and the Wall Street Examiner is a guy I really respect, who knows as much about the workings of the US Fed and Treasury as anybody. Here's the start of his latest missive: by Lee Adler, Tuesday, July 14, 2009, in Money and The Fed, Professional Edition | Permalink |Comments (0) Edit The 4 week bill auction was again very strong, signaling no diminution of strong buying interest from FCBs [Foreign Central Banks] and others. So the game can go on. It had better. The Treasury released its monthly statement for June late yesterday and it revealed that revenues covered only 70% of outlays, continuing a weakening trend that began early in 2008. Tax receipts dropped 17% from June 2008. While the trend of diminishing receipts has slowed a bit, there’s no sign of… Read more »

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