What’s March 18th Got to Do with It?

The Real Estate Board of Greater Vancouver (REBGV) released its stats package for February and, as expected, it showed significant price and sales strength in February. Press package can be found here, also redistributed here.

The recent market strength has caught even some Realtors like AgentWill and YatterMatters by surprise.

Long-time real estate blogger (and owner) mohican makes note of a so-called “bifurcation” of the provincial market, noting flat to lower prices in the Fraser Valley, Chilliwack, Okanagan, Northern Interior, etc. Househuntvictoria describes Victoria’s February market as “frothy”, though prices in the region are down from their mid-2010 peak.

As for Vancouver (REBGV, which includes Sunshine Coast and Sea to Ski corridor), the following information is noted:

  • Vancouver West and Richmond, as reported as it happened by various online and mainstream media sources, showed significant sales and price strength.
  • Detached increased in price faster than attached/condo
  • Most areas, save Whistler and a few low-volume areas prone to more month-to-month variance, showed sales increases over February 2010

It helps to remember that real people are buying properties — in Vancouver in February in near-record numbers at record prices — and it’s worth asking exactly who is buying, why now, and how. Fish10 recently opined on a few ideas including the usual suspects: rich foreigners, black market activity, commodities, and an increase of investment scams perpetrated by locals. Here is a subset of some rationales for the market’s strength:

Foreign income. Simply this is the “Hot Asian Money” AKA “HAM” conjecture, that significant amounts of foreign capital are entering the province and causing ripples of cash to propagate in the local economy. (Remember all areas in the suburbs of Vancouver have shown price strength, not just areas with large immigrant activity, though this effect seems to diminish with distance from the city centre.) It need not necessarily take significant foreign income to drive prices higher, merely the belief there is foreign income to drive prices higher. Given the time to complete transactions and given those I know of personally involved in purchasing property in the current market, it’s not all foreigners buying.

Small uptick in mortgage rates. 3 month lockdown of low rates is soon coming to an end. A 0.5% increase in rates is about a 7% increase in monthly payments at current 5 year fixed rates of around 4%.

March 18th 35 year amortization CMHC mortgage insurance moratorium. If enough buyers are highly leveraged (greater than 5:1), the desire to get into a 35 year amortization term may be bringing forward some sales. The maths indicate a change from 35 to 30 years amortization is about a 7% increase in monthly payments. (February detached benchmark price was only up about 3.5% month-over-month…)

Pricedoutitis. If properties in desirable locales are truly “detached” from incomes, it may simply be another round of buying now before being forced to look in significantly less desirable areas. This may go to explain the urgency with which certain properties and neighbourhoods are moving, while others (even certain props embedded in the “hot” areas) linger.

Raw speculation. This can be construed as a symptom for local economic weakness: nobody has anything better to do but flip real estate. Turnover of certain properties seems short and the margins high, though it may just be these types of transactions are more a meme in the media, not that they are occurring with greater frequency. Builders may also be at play more recently than before. See “foreign income” as a reason why.

There are lots of other reasons of course, including simple banal randomness. In the end, does it really matter? The excuses given for market strengths and weaknesses are often symptoms rather than root causes. Nobody likes to hear they’re dumb. Just kidding. You’re not dumb.

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blueskies
Guest
blueskies

Mar 18 notwithstanding, at 70%

ownership rates where are the

renters coming from to fill

the mortgage helper suites

and investment condos?

I've noticed a number of rentals

available in the west end including

penthouses west of Denman.

On a couple of streets every building has

a for rent sign with several showing

immediate availability.

Anonymous
Guest
Anonymous

http://www.cnbc.com/id/41885295

should China ppt values fall, what impact here? big decline in sales activity in coastal China – could there be a knock on impact, and if prices there slide and here as well, will a virtuous cycle ensue?

Extremely rich Van h
Guest
Extremely rich Van h

SEE,the market is red hot due to Chinese money.Vancouver is pretty much like an island in a stormy ocean where American RE is collasing in a pathethic patterm and no propect of seeing the end.Vancover is so lucky.Bears,any more excuse for the spike?

Where is the Honky factors?

Indeed...
Guest
Indeed...

Blueskies,

as much as I dislike (actually HATE) to admit it, the houses on the West Side get sold like they were dime a dozen. I feel like screaming from the top of my lungs…. Who are these people who are shelling millions of dollars for houses here – in this medium sized town, with no culture, no decent roads, no companies' headquarters (other than Lululemon), pathetic and criminally bad quality of construction? Why are they paying so much money? It seems that only here a million is worth practically nothing, and it makes me sooo mad!!!

LY
Guest
LY

real estate is still hot in White Rock and Richmond according to our White rock friend. She called to inquire about a newly posted detached property for sale at mls. It was sold. According to the realtor, some detached properties are sold even before they get posted on mls website. Will this madness continue after March 18?

Troll
Guest
Troll

Looking at the last stats package, the strength of the market is absolutely shocking. It's in sharp contrast to bears who swear that we've run out of buyers. This surge could continue past the 18th.

I think the cause is a combination of all the factors listed, swirling together in some kind of macabre positive feeback loop.

registered
Member
registered

@Indeed: That may be so but paying multiples of historical max in the last peaking Western market defines 'greatest fool'. Pundits have done a great job painting China as the land of 'new-Buffetts' without providing details warranting it. The complete lack of Western regulations and sub-minimum wage labour might just make it easier to get rich, go figure. So there's no reason to associate their mass actions with business acumen or foresight, my bet is they're getting screwed-over in both countries and when it's all over we'll have a new class of rich immigrant with few skills relevant to Western business environments.

Big F for Bears
Guest
Big F for Bears

fucking bears…

you have been so fucking wrong for so long you will never be right

you have not had one fucking prediction right!

you do you little micro analyses, thinking you are smarter than everyone, but you have CONSISTENTLY been wrong

wake up and smell the strength of RE or face another 10 years of renting (and dont' give me this bullshit about loving renting you obsessively post here day in day out

Eddie
Guest
Eddie

The truth is in the numbers folks. Sales are increasing as they do every year at this time… But the listings are going through the roof.

April and May will be D-Day for the bears. It's happened in every other westernized country, us dumb Canucks are just so far behind we think we're first!

Best place on meth
Member
Best place on meth

@Big F for Bears:

Why so angry, buddy?

You cheerleaders just had your best month ever, didn't you?

Is it because we fully expected February to be a hot month?

Beware the 18th of March.

Larry,Maggie,Aaron,C
Guest
Larry,Maggie,Aaron,C

@Troll:

You really do sound like one of our relatives!

Big F for Bears
Guest
Big F for Bears

@Big F for Bears:

Why so angry, buddy?

You cheerleaders just had your best month ever, didn’t you?

Is it because we fully expected February to be a hot month?

Beware the 18th of March.

*******

Yes, like beware the:

* end of zero down 40 year amortization

* end of the Olympics

* the rise in interest rates

* the April 2010 mortgage changes

* the introduction of the GST

* the 12, 13, 14, 15, 16k inventory "parties"

Yes, the 18th will herald the end of all little grad school boy just like everything on that list was to herald the end of the market.

Oooh – be sure to celebrate that upcoming 13k inventory party little bears – I am sure that that will signal the collapse as well.

VHB
Member
VHB

@Big F for Bears: "be sure to celebrate that upcoming 13k inventory party little bears "

Thanks! We will! Happy mortgage payments!

Best place on meth
Member
Best place on meth

@Big F for Bears:

Why not just wait a couple of weeks and we'll see what happens?

I'm patient and confident while you lash out for no apparent reason.

You cheerleaders have the patience of 4 year olds.

Big F for Bears
Guest
Big F for Bears

March 3rd, 2011 at 9:27 am

@Big F for Bears:

Why not just wait a couple of weeks and we’ll see what happens?

I’m patient and confident while you lash out for no apparent reason.

You cheerleaders have the patience of 4 year olds.

*******

No worries. I am not the wrong that has been wrong for 4 or 5 years now, and consistently wrong with predictions since 2008.

I can wait a mere two weeks to laugh once again and point out how consistently wrong you bears have been.

And you are right – I don't have the patience of a bear. I personally could not be that patient and that wrong for so many years. I am glad you are comfortable in your skin.

data junkie
Guest
data junkie

The 5-year bond rate, after taking a drubbing last week in the wake of the Bank of Canada's announcement that Bank rates are holding steady for the foreseeable future, has gone absolutely bonkers in the last two days. Totally parabolic, in fact; as I type, they're up a whopping 7% on the day. It looks like you can't pay people to take a 5-year note.

http://www.bloomberg.com/apps/quote?ticker=GCAN5Y

I said last week on the Financial Insights blog that anyone bidding down 5-year bonds in this environment was a moron. Looks like I was right… the fundamentals speak for themselves.

April mortgages might now be a perfect storm, between higher 5-year qualifying rates and the death of the 35 year amortization. We shall see…

Anonymouse
Guest
Anonymouse

@blueskies:

"Mar 18 notwithstanding, at 70%

ownership rates where are the

renters coming from to fill

the mortgage helper suites

and investment condos?"

Is 70% the rate of ownership by household or by population? If it's the former, then one possible explanation is that people are choosing to live on their own for longer. That is to say, the number of households relative to the population as a whole is increasing.

VHB
Member
VHB

@data junkie: Woah +18.5bps right now!!!

VHB
Member
VHB

"I don’t have the patience of a bear."

Thank you for admitting that. That is precisely why we will win. Precisely. Enjoy your sugar high.

data junkie
Guest
data junkie

@VHB: Buying them up was always a dumb play. I mean, these are five YEAR bonds, and everybody and their mother knows that rates will be going up sooner or later this year. What a terrible buy!

Remember, kids: the so-called Masters of the Universe are often just as stupid and ignorant as the people buying detached SFHs on a floodplain in Richmond for $1M+.

data junkie
Guest
data junkie

@data junkie: Hum, no idea why my little picture changes…

Best place on meth
Member
Best place on meth

@data junkie:

Still climbing, a fresh 10 month high.

Big F for Bears
Guest
Big F for Bears

“I don’t have the patience of a bear.”

Thank you for admitting that. That is precisely why we will win. Precisely. Enjoy your sugar high.

******

Sure..a stopped clock is right twice a day…keep that patience up…

You will need it…only what, 7 more years of declines if the supposed bubble bursts before you can buy at anything resembling "bear" metrics

Enjoy the wait…nothing like waiting a decade plus

VHB
Member
VHB

@Best place on meth: The 5-yr bond vs 5-yr mortgage spread is testing its lows. If the 5-yr bond yield jump sticks, it would be very hard for banks not to pump up the 5-yr mortgage rates.

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