A Tale of Two Cities

Average Vancouver detached prices to the moon! Check out Larry Yatkowsky’s graph.

Alas all is not well in BC. The Vancouver Sun shows a few Okanagan MLS listings, highlighting what a cool 550,000 smackeroonies gets you, compared to the EastVan McGill Speedway placeholder (pictured below). Kelowna has been experiencing a significant inventory glut over the past year and prices are starting to fall:

While Metro Vancouver’s home prices continue to rise, prices in the Okanagans have experienced a significant slide, local realtors said Monday.

One local agent says vacation properties are “feeling the pinch,” as buyers focus on their home markets during the economic turmoil in the past few years.

So the euphemism du jour is “pinch”. Not exactly the best of times up there. Let’s look at a couple of these “vacation” properties. What’s the difference between a vacation property and a principal residence exactly?

2919 MCGILL ST Vancouver

545 San Cabrio Court, Kelowna area

965 Monashee Place, Kelowna

Ah but location is everything you say. Meh, I’ll use these props as a baseline and revisit what $550K buys in our Two Cities later on this year.

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Whisperer
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Whisperer

I note that, in the comments section, Larry Yatkowsky says that 21 properties sold for more than $10 million each. I wonder how much that affected the average?

oneangryslav2
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oneangryslav2
@Whisperer: You don't have to wonder; there's this thing called mathematics that will help you arrive at the answer. 🙂 From Larry's data: 793 detached homes sold in January at an average price of $1,144,537. Thus, the total value of homes sold was 793*1,144,537=907,617,841. Let's assume that the 21 properties sold for more than $10 million, sold at exactly $10 million each (to provide an estimate of the minimal dollar amount that these properties skewed the averages upward). Thus, we take 21*10000000-$210,000,000 off the total sold value. (As an aside, these homes accounted for at least 23% of the total value of real estate sold!! So, taking the number and dollar value of these sales away from the total we get 772 detached homes sold for a total value of $697 617 841. So the average comes out to about… Read more »
N
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N

Still, 21 houses selling for over ten million is not generally a sign of a weak market. When fundamentals do kick in we won't need to use calculators to figure it out.

blueskies
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blueskies

China Is Poised to Raise Rates Again, Bankers Say

http://tinyurl.com/bearishChinesenews

from the NYT

"Inflation lately has caused friction in China’s mighty export machine. Now, Beijing’s efforts to fight inflation, through higher interest rates and tighter restrictions on bank loans, could begin to slow segments of China’s domestic economy slightly — particularly the breakneck pace of investment in new factories, office buildings and apartment complexes.

That, in turn, could weaken demand for industrial materials like steel and copper that depend heavily on Chinese purchases."

good news for Canada?

methinks not………

VHB
Member
VHB
Here are some inventory counts for February 1st. These are numbers I noted from realtylink.org over the past few years. There are some holes in the data, so I hope this formats well. Area 06 07 08 09 10 11 DT-FN condos 354 509 475 790 ?? 546 CH condos 69 109 112 207 ?? 159 VW detached 358 335 331 ?? ?? 374 BU detached ?? ?? 294 440 ?? 233 NW detached ?? 73 61 96 ?? 82 Some comments: 1) Despite reports to the contrary, VW detached listings are healthy–more than typical at this time of year. Nowhere near levels of 2009 yet of course, but no shortage either. 2) CH condos, DT-FN condos, and NW detached are pretty heavy on the inventory. Why? 3) BU is light on inventory. My VE numbers (not shown–only a couple… Read more »
1
Guest
1

Victoria average prices took a hammering.

I agree, I think its sales mix, if normalized (adjusted), other than Richmond/Westside, me thinks things are flatlining at best, and beggining to weaken is actually what I think we are seeing.

As the new mortgage rules hit (in a few months (again, anyone for sure know if the deal has to be done, or just the mtg pre-approved, as this will lengthen the time to impact)) and then the higher expected interest rates (anyone smell inflation), I can't see the jugernaut continue…then again, I thought this long ago as well….

VHB
Member
VHB

@VHB: My VW detached comment (1) is better interpreted if you could see the 2009 and 2010 numbers. For 2009, the first data point I have is 694 for February 15th. We are far behind pace to hit that. For 2010, the first data point I have for VW is 391 on February 7th. I bet we will surpass that for 2011.

Inventory growth, aside from some oddities like VE and BU, is strong.

Again, all this is from public MLS listings. These numbers are not official. I don't have any special paulb-esque access to the fancy realtor database.

registered
Member
registered

#2 oneangryslav2 Says: "Anybody who thinks that the mix of homes isn’t important when trying to compare average prices is an idiot."

Can't speak for Yatter specifically but the benchmark appears to have been downplayed by the industry in general ever since it stopped delivering the right message. "Vancouver benchmark up 4.6% year over year" doesn't have the same bam-biff-pow appeal as "average to the moon!"

For good reason. Economists like Thornberg in the US predicted that when activity at the low end slows or stops, the end has begun. Average hides that.

VHB
Member
VHB

@VHB: Allow me one more. VW detached peaked out at 1010 in late September 2008 according to my records. That is when we saw substantial price drops.

For DT-FN condos, we peaked out at 1142 on June 25, 2010, far surpassing the 2008 peak. We didn't see great price drops because inventory fell back over the summer.

If you want a target number to keep in mind, how about this: When we see sustained 1000+ inventory for SFH in VW detached or DT-FN condos, we will see substantial price drops in those categories.

Inventory is growing, but there is a LONG hill to climb before we get to those levels. Of course, that's why we enjoy the inventory parties so much–these are important mileposts on the way to where things need to go if there are to be price drops.

specialfx3000
Member
specialfx3000

http://www.news1130.com/news/local/article/177911

"City council considering five skyscrapers downtown"

So would one consider this as bear or bull news? More units means more glut to inventory. On the other hand, more construction workers employed to continue the ponzi scheme.

(Granted, if this moves forward, we may be quite a few year away from digging the first hole in the ground)

VHB
Member
VHB

Here is the residential aggregate over the past 13 months.

Dec-09 237.56

Jan-10 242.12

Feb-10 245.78

Mar-10 246.84

Apr-10 250.64

May-10 249.47

Jun-10 245.07

Jul-10 243.73

Aug-10 243.53

Sep-10 243.78

Oct-10 244.7

Nov-10 245

Dec-10 244.04

So, if we see a drop of more than 1.92 points, we'll be at negative y-o-y prices.

I actually expect a small increase in the benchmark this month since January is a month with lots of impatient buyers, but it should be within a hair of 0 +/- given the 6.0 inventory level.

Absinthe
Member
Absinthe

Based on Larry's graph, what do y'all think the likelihood of a head and shoulders formation on price is?

The top today is so much higher than 2008, that there's the possibility of a bear trap in 2013 if there's a head and shoulders pattern. Thing is, the catch & rise in 2008 wasn't initially just market sentiment but gov't policy.

VHB
Member
VHB

The 5-yr is getting above 2.60 now. link.

Who knows where it would go. But it's funny how even say a 50 bps increase in mortgage rates would have pumpers peeing their pants. Gee, must be a solid foundation for the 'boom' here, eh?

joycer
Member
joycer

@Whisperer:

Larry Yatkowsky says that 21 properties sold for more than $10 million each.

To me it's all about perception:

Imagine the kind of stories that spreads in the real estate community with those 21 sales in one month (realtor to realtor to client…). Then the average comes out inflated by some $250,000 (thanks oneangryslav2!) and goes to confirm the tales of wealthy buyers, spring market taking off again, etc. and the fantasy rolls on. Advice that potential buyers and sellers (making up the market) will get from realtors will be heavily influenced by these stats as a way to justify why prices being so far out of proportion to incomes is normal in Vancouver and how it is different here.

kansai92
Guest
kansai92

@N:

That doesn't say much.

What were those properties worth 3 years ago? 15mil?

IT__Pro
Guest
IT__Pro

It's funny how every article the references any price weakness (eg. Kelowna, Whistler, remote BC waterfront)…the article always ends on a similar note:

"Connerty added, however, that most industry experts expect prices to rebound from the buyers' market condition."

Best place on meth
Member
Best place on meth

@oneangryslav2:

Thanks for doing the math on that.

I was immediately suspicious of Larry's numbers and that's why I asked him how many 10M+ sales there were in January and he confirmed my suspicions. A hell of a lot more than is normal.

That's why the average is useless and will be down sharply next month.

M-
Member

@VHB: Hi VHB, if you'd like some advice on formatting your numbers, I use dots (…..) to format– they won't get lost in the HTML formatting. You do have to adjust a little with the previous window (silly variable-width fonts!), but it works…

For example, renumbering your inventory list shows the chart a little more legibly:

Area…………… 06… 07… 08… 09… 10… 11

DT-FN condos. 354. 509. 475. 790. ??… 546

CH condos……. 69.. 109. 112. 207. ??… 159

VW detached.. 358.. 335. 331. ??… ??… 374

BU detached… ??… ??… 294. 440. ??… 233

NW detached… ??… 73… 61… 96… ??… 82

And as always, thanks for posting your commentary and analysis!

specialfx3000
Member
specialfx3000

@Best place on meth:

"That’s why the average is useless and will be down sharply next month."

Good point. The average is so meaningless. If there is not another 20 $10M+ sales in Feb, the M-O-M average will look real ugly comparing Jan and Feb 2011. (Let's bring on more $30 per diem bus load of Chinese investors)

asalvari2
Guest
asalvari2

@Best place on meth:

Good catch meth. I saw the numbers and freaked out completely (end of the world – whats going on). Then I read the comments section and found your Q with Larry A: 21. HA. What a joke!

asalvari1
Guest
asalvari1

@Best place on meth:

Good catch meth. I saw the numbers and freaked out completely (end of the world – whats going on). Then I read the comments section and found your Q with Larry A: 21. HA. What a joke!

Anonymouse
Guest
Anonymouse

"Meh, I’ll use these props as a baseline and revisit what $550K buys in our Two Cities later on this year."

Are they an unbiased pair of properties, or has the Vancouver Sun deliberately picked the best of Kelowna to compare with the worst of Vancouver for the sake of journalism?

XXX
Guest
XXX

Can someone explain to me why Richmond and Van westside is so strong?

After you say rich asians can someone explain AGAIN why rich asians don't affect price?

Get your heads out of your arse's. I don't know how long it will last but please, please go to an open house in Mckenzie Heights this week/wknd and count the white people on one hand … and bring a hand held counter for the asians – you'll need it.

Junius
Guest
Junius

Does anyone know how many homes in the $10 million range normally sell in a month or year? It seems like a very high number for a short period.

Best place on meth
Member
Best place on meth

@Junius:

Yatter said there was 1 sale last month and zero the month before.

That makes the 21 in January a severe anomaly and his theory is Chinese buying for New Years.

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