House market surging in Vancouver
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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July 22nd, 2009 at 9:13 pm
a bunch of miserable tenants complaining for years and years in their basement suite
July 16th, 2009 at 12:52 pm
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.
July 16th, 2009 at 12:37 pm
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.
July 16th, 2009 at 12:07 pm
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.
July 15th, 2009 at 10:28 pm
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.
July 15th, 2009 at 10:18 am
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.
July 15th, 2009 at 9:28 am
read on: It’s ALWAYS a good time to spend someone else’s money.
July 15th, 2009 at 9:01 am
“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?
July 15th, 2009 at 8:41 am
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?
July 15th, 2009 at 7:45 am
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.
July 15th, 2009 at 7:43 am
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.
July 15th, 2009 at 7:41 am
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.
July 15th, 2009 at 4:05 am
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?
July 15th, 2009 at 3:13 am
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.
July 15th, 2009 at 12:43 am
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.
July 14th, 2009 at 11:16 pm
Wonder if this impacts the trades at all?
http://www.cbc.ca/world/story/.....exico.html
July 14th, 2009 at 11:08 pm
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.
July 14th, 2009 at 10:48 pm
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, and in fact paid below asking price.
The point I’m trying to make is that the FTBs described in this article actually do exist, and are in fact buying. I actually know quite a few others like me who are looking to buy fairly soon, will not be over-leveraging themselves, and definitely constitute “pent-up demand”. As a result, I have a difficult time seeing an all-out collapse of the lower end of the market, even with increasing interest rates. I suppose time will tell.
One point I`d note is that it is often stated on these blogs as gospel that currently one can effectively rent a given place at a cheaper price than owning the same place would cost (to put it in simplistic terms). This is no doubt true for some places, particularly cookie-cutter types of condos. One factor which seems to rarely come up is the availability of certain types of rentals in certain locations. In my case, I was looking in a specific area, for a pretty specific type of place, and simply could not find a good one available. Not all condos are completely fungible.
Anyways, I doubt I am all that exceptional of a case…just thought I’d throw my little anecdote into the mix for consideration.
July 14th, 2009 at 10:41 pm
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 – there was no alternative!
Yeah go buy RE or be priced out forever.
July 14th, 2009 at 9:52 pm
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 buyers have to walk away from their contracts but it never happened due to the banks new policy.
Just like the above poster said, I am very very tired of the Vancouver real estate market. I would love to move to another city so I can buy a nice home under $400K. I simply cannot understand why with my combined $160K income, I cannot afford a nice home. Why people with far less income are buying like crazy.
July 14th, 2009 at 8:37 pm
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 one good thing about the ridiculous law suits in the states is it makes people afraid to be dishonest and get caught. Here if a company rips you off as a consumer or treats you poorly as an employer you have no recourse.
It is not just real estate it is all industries.
July 14th, 2009 at 7:54 pm
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.
July 14th, 2009 at 7:48 pm
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 ‘sell confidence’when in fact the stats are looking pretty weak. I for one am not buying it.
All this BS reminds me of the push in the 30′s when ‘better days are just around the corner’ speeches were part of every roadshow.
We listen to the bull and then look at the actual data. The facts show a consistent deterioration. Theres suckers rallies in every bear market.
July 14th, 2009 at 7:20 pm
Vancouver will be different
http://www.calculatedriskblog......rices.html
There is no escaping the line of doom (CPI adjusted)
July 14th, 2009 at 6:31 pm
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:
The last bolded part is really the multi-trillion dollar question. (By the way, I have no financial connection to the site, but do think it’s a great site and Adler is as straight up as they come.)
July 14th, 2009 at 6:07 pm
I think the saddest thing to emerge from the Vancouver housing bubble is the lack of objective journalism within the mainstream BC press.
Now I may be a little naive here, but being a non-Canadian ex-resident that left just before the craziness started – it what I see happening, and what’s actually reported seem so out of alignment that I wouldn’t even call it journalism. In many cases it’s pure propaganda in the truest sense of the word.
It’s true that there’s been some reports here and there – but my wife (Canadian, from Vancouver) reads all the MSP, and not once has she shown me a good objective argument breaking down what may be one of the biggest financial events of our lives. If I based my financial judgement on what I read in print, I would be in serious shit.
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.
July 14th, 2009 at 5:49 pm
Listen up crew, i read Garth Turner’s book but didn’t find any mention of a printing press or land making machine. The sap has been wrong more times than Freako. I’m calling the bottom and lining my birdcage with Garths’ book.
July 14th, 2009 at 5:26 pm
VanBanker:
What a moron Barrie is! After all, the recession is over, green shoots everywhere, the real estate market is just hopping. Hell, by the spring of next year he’ll be able to sell each 1BR condo for at least a million dollars. John (above), here’s your chance to strike it rich, man.
July 14th, 2009 at 5:20 pm
“NO -LYMPICS Says:
July 14th, 2009 at 3:05 pm
Anyone got any scoop(dirt?) on Bear Mountain development on Vancouver Island.”
I know they cancelled several phases going on in that develop, and most of the major banks declared it a no-go zone last year, no one will lend them any money. One of the major banks financed most of it, along with a mezz debt lender, but they’re trying to get their loans down as fast as possible.
Last I heard Barrie was trying to sell the whole thing, and there have been alot of rumours, but nothing substantial.
July 14th, 2009 at 5:19 pm
Unemployment rate nearly triples
by Wayne Moore
http://www.castanet.net/news/K.....kelowna.ca
Unemployment in the Central Okanagan has nearly tripled over the past 12 months.
Figures released Friday by Stats Can show unemployment in the Central Okanagan at a staggering 12.3% in June.
That compares to a nearly rock bottom level of 4.3% in June, 2008.
In real numbers, 12,500 people were looking for work in the Central Okanagan last month, compared to 4,300 in June of last year.
In May of 2009, the unemployment rate in the Kelowna area sat at 11.5%.
Regionally, unemployment nearly doubled in the Thompson-Okanagan, jumping from 5.1% in June, 2008 to 9.8% last month.
=======
As we all know, liars figure and figures lie….the REAL numbers are likley WORSE.
These unemployment numbers indicate an economy that can’t sustain high RE prices but dependent on in-migration.
July 14th, 2009 at 5:16 pm
Anonymous:
how would you propose that the government keeps long bond rates down?
It’s not generally possible for governments to set their own long term interest rate, however in Canada most people renew their mortgages every 5 years or they have a variable rate. The question is, how long can governments irresponsibly depress short term interest rates while inflation rages? Five years would be enough to do major damage to peoples’ savings.
July 14th, 2009 at 5:06 pm
Yalie: I can’t wait for Spring 2010, in the months while we Vancouverites are still basking in the post-Olympics glow*, and the inevitable spring bounce has occurred. Real estate bears will be pulling their hair out.
Someone above mentioned that the Olympics has most likely had no discernable impact on the housing bubble here, but I disagree. I think that many who are currently cash-flow negative on property are just waiting to catch the post-Olympic boom to riches.
By late summer 2010, we should really start to see the feces hit the air mover.
*I’m saying this only a little bit facetiously since I honestly have no idea whether we will be looking back at the Olympics as a success or a boondoggle or–which is most likely–as much ado about nothing.
July 14th, 2009 at 5:00 pm
A lot of collapsing housing bubbles seem to suck in the last of the bears for a ‘spring bounce’ during the first two years of collapse. Check out the median price graph for Sacramento, they saw spring bounces for the first two years of collapse, but the last two springs have been flat:
http://3.bp.blogspot.com/_oqQI.....4-2009.jpg
July 14th, 2009 at 5:00 pm
I believe, technically by defination, a recession is over when GDP grows. That doesn’t mean everything goes back to the way is was with crazy bubble growth or anything. 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.
July 14th, 2009 at 4:57 pm
Logic to the illogical
From Garth’s latest blog:
http://www.greaterfool.ca/
” The point is this: Money is cheaper than a Made-in-China BBQ. Mortgage rates are between one quarter and one-half of the average of the last twenty years. At the moment, this is because central banks around the world, acting under political pressure, have artificially and temporarily depressed rates in order to encourage borrowing. And it’s worked. The sheeple are at the trough.
Cheap money has yielded another consequence: Real estate prices have become more inflated as a result. Just a year ago, the five-year mortgage rate was north of 6%, and the housing market was doing a slow crumble. Today that mortgage is half as much, and we have multiple offers. House prices have not changed much, but the cost of debt has.
Two conclusions are inescapable: Real estate is in trouble when rates return to historic norms, unless prices take a plunge. And, people who are worried about their mortgages today should start lining up organ donors.”
======
Re the current faux spring RE bounce.
Propogandize(versus tell the truth), create or lure greater fools with cheap financing, manipulate any related stats to claim “now is the time to buy” or ” buy now before it’s too late.”
blah blah blah
Garth pretty much sums it up, does he not ?
Watched a show recently about humboldt squid.
Nasty creatures..
They can grab you with their teeth lined tentacles, leave serious marks due to the suction , if they don’t take big chunks of flesh out with their beaks, and if they don’t outright drag and drown you.
IMHO, thats what’s going on in RE ….the tentacles of the desperate elite/establishment trying to grab the last remaining suckers.
July 14th, 2009 at 4:07 pm
RE 41 Spring bounce.
Check out these graphs from the Florida bubble:
http://patrick.net/forum/?p=16514
Notice that housing prices spike up EVERY year in spring/summer, and decline over the winter. This pattern existed in the years before and after the bubble burst, just as it will here.
Can someone remind me again why so many people have their knickers in a bunch over this all-too-predictable temporary spike?
July 14th, 2009 at 3:55 pm
YLTNboomerang 49: I am born and raised here but have worked around the world for months at a time so have had a chance to “experience” many cities from more than a tourists perspective. If I go to Europe, it will be the UK or Germany; if I go to the US it will probably be California or Texas, why? I’m sick of the rain and want a warm climate; Texan’s are friendly folk and the state is well located for holiday travel; California is warm and close to the extended family in Vancouver. My reason’s for the European choices are cultural where it would be London in the UK and Berlin in Germany.
Perhaps this is too ethno-centric, but may I ask what ethnicity you are? Not everyone can fit in as easily when moving to say Texas or Berlin. For some, Vancouver might be the best option.