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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[…] at vancouvercondo.info March 3rd, 2011 at 7:50 am- “As much as I dislike (actually HATE) to admit it, the houses on the West Side get sold like […]

Bear Vancouverite
Bear Vancouverite
9 years ago

|Enjoy the wait…nothing like waiting a decade plus

: "… with higher disposable income than a homoaner."

… if someone bought 10yrs ago their mortgage is probably cheaper than most people's rent :|.

domus
domus
9 years ago

@rp1: if you strip out the London market (where rents are actually expensive) the rest of Britain is still in a massive housing bubble.

rp1
rp1
9 years ago

#56 @Kosta: "Mainland Chinese are buying Okanagan vineyards…"

The Americans do this so much better than us. Obama *assures them* that their TRILLIONS of USG Monopoly money is not worthless while Bernanke prints another trillion or four out the back door. Wall Street sells them a subordinate tranche of a CDO^2 that ultimately boils down to a bet on the value of 1000 hobo signatures. We're selling REAL ASSETS that produce BOOZE?!?! WTF?!?! No wonder people are mad.

rp1
rp1
9 years ago

#78 @domus: "A supercool application at the site of the Economist:"

Vancouver looks a lot like Britain in that comparison. I think the best international measure is price-to-rent.

painted turtle
painted turtle
9 years ago

We are nation of debt junkies…

Everybody is playing the lottery game and greed is reaching Biblical proportions

Boombust
Boombust
9 years ago

"But remember: no major correction because incomes are growing with prices even though they didn’t in the last decade. Ignore the last decade. Income growth going forward is where it’s at."

Yeah. That's it. Got it.

Best place on meth
Best place on meth
9 years ago

Screw this, I'm just going to make up some numbers for the day.

623, 183, 64

Good night, everybody!

Boombust
Boombust
9 years ago

"You bears would die to have been in the café I was in just in…"

Puhleeze!

Get back on that bus to Montreal.

Dave
9 years ago

@vomitingdog:

These are not the Dave's you are looking for. He can go on about his business. Move along.

Best place on meth
Best place on meth
9 years ago

@Extremely rich Van house owner.:

China is following in the footstep of Japan with their massive asset bubbles and wild, drunken spending.

I hope they continue the tradition of following in Japan's footsteps and some day actually produce something that isn't either toxic or complete shit.

Extremely rich Van h
Extremely rich Van h
9 years ago

(Mainland Chinese are buying Okanagan vineyards and land on a large scale right now running up export businesses to M-China. M-China middle class is all about BC wines and fine dining these days. It is expected that M-China recreational home buyer tsunami is about to hit Okanagan as we speak and everyone there is bracing for bidding wars of historical proportions.)

It lets you guys witness China power once in a life time.China power crashes those bears'nuts.

Extremely rich Van h
Extremely rich Van h
9 years ago

@Lord Huggington:

Liar,as a home owner I ain't see such phenomena happened,bears are mindless stupid idiots.

Extremely rich Van h
Extremely rich Van h
9 years ago

@Anonymous:

Why they are landless and RE-less,and still living in a stinky basement because they ignore China is the boss now and its financial power has scarced the shit off from those Yankee minded honkies who still think the world is still run on white power.

Larry Chipman
Larry Chipman
9 years ago

@vomitingdog:

Vomit, you must admit it's a bit sad

vomitingdog
vomitingdog
9 years ago

@Dave:

Why? Have I nearly blown your cover? Don't worry, I won't. I value anonymity.

N
N
9 years ago

@cico:

"I think what we will see is sales starting to slow down right across the country. You could actually see prices flatten out, if not even dip a little bit."

Nah. Prices flattening, I don't believe it. And dipping! Come on, this is real estate we're talking about here.

cico
cico
9 years ago

Canada has a bubble? ready to burst? No,impossible! OH, just some economists saying.

food inflation? Gas inflation? interest rates rising? just saying

http://www.news1130.com/news/local/article/192346

Rennie Le Realtor
Rennie Le Realtor
9 years ago

Troll, Dave,

It's understandable. It’s, retribution of a sort.

The bears are responsible for the demise of what you thought was going to be an endless source of leads, hence sales, instead you ended up making a fool of yourself, so now you come and vomit on this blog.

Sad, pathetic and sick you are!

Dave
9 years ago

@Troll:

Nice work.

Dave
9 years ago

@pricedoutfornow:

Kelowna – Best place on earth to be underwater.

patriotz
9 years ago

@domus:

Note that prior to the current bubble there was a lack of correlation between BC/Alberta and Ontario RE markets so the numbers for Canada pre-2000 don't tell you much.

patriotz
9 years ago

@VHB:

So, a real huge deathspiral of people throwing stuff onto the market could likely only be triggered by higher i-rates.

No, all it requires is a reasonable number of investors deciding it's time to get out out of Dodge. They sell, driving prices down, and more investors get the message. Rinse and repeat.

Note I said investors. Owner-occupiers almost never sell in anticipation of price drops. Eventually after they've been underwater long enough and there's a significant premium to renting they give up and stop paying, as in the US.

Dave
9 years ago

@vomitingdog:

Was this cafe Downtown, near Burrard Street by any chance?