Where have all the buyers gone?
The July stats package from the REBGV should be released soon, but in the meanwhile Inventory shared some interesting month end stats for unit sales – they’re dropping all over the place compared to the same month last year:
August 4th, 2010 at 11:07 pm
Your graph going positively. Great
August 4th, 2010 at 6:29 am
@patriotz:
No it means we had a good start to the year with a tough finish. The market will balance itself out again by next Spring, if not earlier.
August 4th, 2010 at 3:56 am
@Stanislav:
That’s completely true, which is why BCREA won’t say it. It means that prices have nowhere to go but down.
Expect them instead to keep talking about “pent-up demand”.
August 4th, 2010 at 3:18 am
@Stanislav:
Nice, but you forgot to mention that with so much inventory on the market now has never been a better time to buy with so many properties to choose from!
The Calgary news release is out and even though SFH prices fell 5% (median) or 4% (mean) in one month, King Realturd(TM) has managed to actually spin this into “we are seeing relative stability in our average and median prices for the Calgary market.”
Now anyone with at least a grade 6 education would see right through this crap, no? Well here’s the lead sentence from the Calgary Herald article on the release:
“Calgary’s housing market continued its summer slowdown in July, although prices appear stable, new figures show.”
August 4th, 2010 at 1:27 am
In Burnaby where building has at least 50% owners of Asian origin, empty condos for newer buildings are around 30%-35%. Older buildings of 15-20 years, around 20-25%. One condo for sale in an older building in Metrotown as the owners are working in China for past 2-3 years. Previous sale prices in that building in 2008 & 2009 were high $300k to $420k. They are asking $488k for a shabby 20-year-old condo for a big profit. Good luck to them.
fwiiw #24 in Cantonese is also pronounced as “yee sei” meaning “easy to die”
August 4th, 2010 at 1:00 am
We are entering a period in history where massive amounts of wealth will be transferred from one segment of the population to another segment. Investments which appear to be ‘too risky’ for many people will turn out to be hugely successful for the few who dare to take that risk.
http://www.kitco.com/ind/Degra.....010_10.gif
August 4th, 2010 at 12:49 am
Hi! Delurking for the first time.
I’d like to re-visit Mclovin’s sample landlord. I can see how it makes sense for that landlord, so I can’t quite grasp why most think it’s a really bad idea.
I have been a bear for several years, and have had my share of being the only one (and being proven wrong) saying prices will fall, in a social situation. What makes it worse for me is the people in the circles I walk in do not have mortgages, or if they do, it’s a conscious decision to use other people’s money at such low rates rather than a financial need that will lead to their downfall once interest rates rise or prices drop. Most of them would agree with Mclovin’s landlord. Here’s why.
Assume : Purchase price = 600K
Downpayment = 200K
Mortgage, strata fees, taxes, insurance, etc = 2500 per month
Principal portion of mortgage = 700 per month
(I’m just throwing numbers out, so please don’t comment on the accuracy of these numbers. It’s more for illustrative purposes.)
Landlord knows he bought high, since to sell would be an immediate 100k loss. So no need to drum into his head what a mistake the purchase was. We just move forward to his options and thought process.
1. Sell – would incur realized 100k loss
2. Rent – under this are 4 scenarios
a. Rent > 2500 – ideal, no question, he’s keeping the cashflow positive property
b. Rent = 2500 – no win, no loss, might as well keep it
c. Rent 1800 not ideal, but he doesn’t consider it a loss (see below)
d. Rent < 1800 – he is losing money and he knows it
In scenario c (Mclovin’s landlord), the argument is that as long as the $1800 portion covers the non-principal portion of expenses, the owner is not actually losing money. Any portion above $1800 would go towards principal. They see it as having to pay $700 (or less) per month for the next x years to pay the $400k mortgage rather than having paid that amount in outright cash. So in effect, they get a drawn out payment scheme with the interest, etc, or even a portion of the principal paid by the tenant. Using other people’s money. Yes, costs rise, but so do rent prices, so assuming it’s a wash and they pay $700 per month till the mortgage is all paid out, they would still think this is better than the 100k loss upfront. It doesn’t matter how much the property costs by the end of the mortgage period, as they would now have a fully paid property and can earn the full rent less expenses.
If we’re talking about opportunity costs, they usually are risk adverse and aren’t well-versed with stocks, bonds, preferreds, TFSA, RRSP, etc. Their basis for comparison is the lowly GIC. And weighing opportunity cost in risky instruments vs 100k immediate loss, they'll accept the opportunity loss.
My question is, how would this decision be considered inferior to selling or losing money (except for opportunity cost)? I could see their point of view, even though it’s not the ideal investment. Please explain. Thanks!
August 4th, 2010 at 12:06 am
For how long has Google Maps been doing Real Estate listings?
August 4th, 2010 at 12:01 am
@oneangryslav2:
“And it wasn’t one observation. I was there for a week and observed this every single night.”
Perhaps the people in adjoining buildings had a more active social life than you.
August 3rd, 2010 at 11:03 pm
Condo naming contest on in TO….any suggestions? I ‘ve got dibs on ‘Fools Paradise’ and ‘Sheeps Pasture’.
http://news.nationalpost.com/2.....tops-2000/
August 3rd, 2010 at 10:58 pm
#123 SG, 4 in Cantonese is ‘Sei’ ( pronounced ’say), but don’t forget that Cantonese is tonal and every word has several meanings depending on the pronunciation. The number 4 is ‘dead’ but it is also ‘forever’ and sometimes the swear word ‘death’ ( like fuck off and die)
.
#24 , unknown ( because catonese is like Cockeny…a rhyming slang … yi sup sei…means nothing so I think the poster has it wrong.
#13 , well thats just stupid superstition and no one in their right mind sets their watch by the Gregorian calendar anymore….well at least since the 14th century.
August 3rd, 2010 at 10:44 pm
Vanhemmeroids a no fun town they say….whys that? because the morons on the shitty council think they can schedule fun and now have decided what food you should eat? Look at North American cities and we find open markets free of government constraint. Vanshitholio is an sheep filled anal shithole compared to anywhere else on the continent.
http://www.nationalpost.com/ne.....story.html
BTW ‘Vanshitholio’ is now a Goggle search word. The English language has been enriched.
August 3rd, 2010 at 9:51 pm
@Newcomer:
Similar crappy houses that can’t sell:
http://www.realtor.com/realest.....source=web
http://www.realtor.com/realest.....source=web
http://www.trulia.com/property.....i-FL-33177
http://www.trulia.com/property.....i-FL-33170
http://www.trulia.com/property.....i-FL-33170
August 3rd, 2010 at 9:44 pm
“4. The improving economy and strong immigration will strengthen the market in 2011.”
With Harper intent on sabotaging the 2011 Census we may never know to what extent immigration is a factor.
August 3rd, 2010 at 9:36 pm
@Raguz:
“It’s a cheap, ugly crap-house not worth more than 126K at its best, especialy taking into account all possible fundamentals and common sense.”
Nonsense. What are the fundamentals that give you that number? Comps rent for 1.8 to 2 K. Do the math.
August 3rd, 2010 at 9:30 pm
@ Stanislav
Aragon’s had these two houses up for sale for about a year now. No price reductions yet, I wonder what their thinking?
http://www.realtor.ca/property.....=586630176
and
http://www.realtor.ca/property.....-861882984
August 3rd, 2010 at 8:57 pm
Small developers who are heavily leveraged see the writing on the wall and have started to drop prices with the hope of blowing out remaining inventory. I am taking about complete projects. This is also true of some larger developers who are holding inventory. The small guys have to obtain approval from their lenders for price drops which obviously begins to raise concerns for the lenders. It is very early days in this correction. Later this year and early next I predict you will see a good number of complete and partially complete projects in foreclosure. Virtually nothing new is moving and hasn’t been for months.
August 3rd, 2010 at 8:48 pm
I think the BCREA has already telegraphed their spin on the numbers with their revised forecast for 2010.
1. Demand brought forward by (a) tightening of CMHC insurance qualifications, (b) anticipated rate increases, and (c) the introduction of the HST.
2. Low sales numbers are temporary and will rebound in 2011 with continued favourable mortgage rates.
3. Prices are firm. Any decline in prices will be small and temporary.
4. The improving economy and strong immigration will strengthen the market in 2011.
In other words, the usual spin for the sheeple.
August 3rd, 2010 at 8:17 pm
@SomeGuy:
It’s a cheap, ugly crap-house not worth more than 126K at its best, especialy taking into account all possible fundamentals and common sense.
http://www.realtor.ca/Property.....=847875065
August 3rd, 2010 at 7:45 pm
“I don’t think any buildings are built with floors involving a “4″ anymore. 13 hasn’t been used in a long time…”
Not so at Nahanni in the Klahanie neighbourhood in Port Moody.
Opened exactly one year ago.
No 4, 13, 14, 24…
Catering to superstitious Asians and Europeans.
August 3rd, 2010 at 7:15 pm
@oneangryslav2: I don’t think any buildings are built with floors involving a “4″ anymore. 13 hasn’t been used in a long time. Apparently unlucky numbers affect value.
August 3rd, 2010 at 7:11 pm
@VRENGD:
REOP is still a backbone of CRA interpretation bulletins. It is nota commonlaw concept, but the CRA’s interpretation.
The challenge is that REOP represents something different for every industry, from RE to art to manufacturing.
August 3rd, 2010 at 7:08 pm
@Devore:
Yes, It is called a “reasonable expectation of profit”
August 3rd, 2010 at 7:07 pm
@Devore:
Yes, It is called a “reasonable expectation of profit”
August 3rd, 2010 at 6:30 pm
@oneangryslav2: “My brother’s condo building–on Queen’s Quay–is built with the lowest door handles I’ve ever seen. That and the fact that floors 4, 13, 4, 24, were missing points to obvious clues as to the developer’s target market.”
Okay, 4 is death to some Asians, 13 is unlucky to some Europeans, you listed 4 twice, and 24 I don’t know. And I guess they’re short. Who are we talking about here? Martians?
August 3rd, 2010 at 6:20 pm
@Devore:
….. Buy high, sell low?…..
New path to self-enlightenment. (Seriously).
August 3rd, 2010 at 6:10 pm
“The July stats package from the REBGV should be released soon…”
Well, it sure as hell is taking them long enough.
But, I guess putting the right spin on it takes a long time, doesn’t it?
“Spooked by the biggest North Korean dance marathon ever…”
“Now that the Gulf oil spill is finally over, buyers can breathe a sigh of relief…”
“Despite tensions along the Lebanon/Israel border, Vancouver buyers are meeting market conditions head on…”
Should be interesting.
August 3rd, 2010 at 5:55 pm
here’s a few decent mortgage calc spreadsheets, for anyone looking to see the results of a mortgage scenario.
http://www.google.ca/search?hl.....p;gs_rfai=
August 3rd, 2010 at 5:34 pm
That should read “I sold it for $5,000 more than I paid for it 11 years earlier:.
August 3rd, 2010 at 5:32 pm
In 1993 I bought a condo in Coquitlam. By 1999 the value had plummeted by 35%. I finally sold it in 2004 for $5,0000 more than I paid for it 11 years earlier. I cringe when I hear of homeowners taking their property off the market expecting prices to come back because sometimes that can take a very long time.
August 3rd, 2010 at 5:15 pm
@Devore:
The CRA used to apply the reasonable expectation of profit test to determine whether there is a business source of income from which to deduct expenses and claim losses, but that rules was invalidated by the Supreme Court of Canada in 2002 in a case called Stewart v. The Queen. Stewart was a case of over leveraged condos that had, at the time, no reasonable prospect of producing a profit. (incidentally, with interest rates at all time lows, Mr. Steward may well be making a profit now).
The legal test for whether there is a business in now:
1. Is the activity purely commercial in nature or is there a personal element to it?
2. If there is a personal element, are there sufficient indicia or commercial, business-like behaviour to enable a court to conclude that the activity was a business?
By the way, the old test was not a “CRA rule”. It was a rule of common law. The CRA applies the law. It doesn’t make up its own rules.
August 3rd, 2010 at 5:08 pm
New Listings 205
Price Changes 158
Sold Listings 80
August 3rd, 2010 at 5:01 pm
One thing bulls may be forgetting is that there are several price reductions that have not sold yet. Once sold, they will impact the stats even more.
Example: MLS V841129
Not sure of the original list price but:
May 21 – Reduced to $659,900
July 7 – Relisted at $648,800
Aug 3 – Reduced to $628,800
That’s 5% in a couple of months..
August 3rd, 2010 at 4:52 pm
@Anoymous: There’s absolutely nothing arbitrary about picking 9 p.m. I suppose I should have picked 5pm, when the sun is still shining and people are still at work? Maybe I should have picked 3 a.m. when most people are sleeping?
And it wasn’t one observation. I was there for a week and observed this every single night.
August 3rd, 2010 at 4:41 pm
@VHB:
I think we are lucky if we crack 1500 this month especially with new home sales totally demolished and dead.
August 3rd, 2010 at 4:39 pm
“If the “no lights in the windows during the mid-evening” is a good indicator of speculation, I’d have to say that there is even more speculation in Toronto than in Vancouver. There were some towers, 35-40 stories, completed up to five years ago, where at about 9:00 pm only a handful of windows were not dark.”
How is that a good indicator? One observation at an arbitrary time?
August 3rd, 2010 at 4:35 pm
Just to remember, here are the August sales from ‘inventory’ going back awhile:
August Units 1994-2009
1994 = 2159 = 44%
1995 = 2326 = 47%
1996 = 2141 = 48%
1997 = 2096 = 55%
1998 = 1589 = 49%
1999 = 2002 = 59%
2000 = 1805 = 51%
2001 = 2659 = 77%
2002 = 2558 = 73%
2003 = 3413 = 88%
2004 = 2570 = 61%
2005 = 3800 = 82%
2006 = 3092 = 65%
2007 = 3493 = 75%
2008 = 1611 = 35%
2009 = 3496 = 74%
In 2008, that was about 77 a day. In 2009 it was about 166 a day.