‘very clear signs’ of market slowdown
Is the Vancouver real estate market cooked?
Sales are plummeting and the lower mainland is choking on inventory.
Tsur Somerville decided it’s time to sound the warning bell in the Vancouver Sun:
“We’re getting this consistently now,” said Tsur Somerville, director, centre for urban economics and real estate, Sauder School of Business at the University of B.C., after a monthly report by the Real Estate Board of Greater Vancouver showed a continued rise in listings as sales drop.
“We’re in a market that’s much slower than what we’re used to and I think that will transfer into much more sluggish prices, at best.”
According to the board’s report, released Monday, May sales were the lowest total for the month since 2001 and 21.1-per-cent lower than the 10-year average for May sales. Local home sales in April were also the lowest total for that month since 2001.
…yeah, that’s right. Lowest since 2001. And the remarkable thing is that the word the real estate board has chosen to describe this market is ‘balanced’.
I guess it is very important to keep your balance while you’re sliding down hill.
June 6th, 2012 at 12:57 am 1
Need to see some major foreclosure activity before the crazy mortgages can be “balanced”…
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June 6th, 2012 at 1:05 am 2
What’s a “sluggish price”?
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June 6th, 2012 at 4:26 am 3
Free markets are always balanced. Anyone can always buy or sell at the market price.
That of course is not the meaning of the REspeak “balanced”, which is more like “it’s a great time to buy or sell”.
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June 6th, 2012 at 6:19 am 4
Unless sales pick up “balanced” will be more like “dead”.
It cannot be overstated how weak 7 MOI in June is. Things do not get better from here.
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June 6th, 2012 at 7:39 am 5
That Vancouver Sun article link is broken; it should be http://www.vancouversun.com/business/Real+estate+numbers+signal+slowdown+analyst/6731296/story.html instead.
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June 6th, 2012 at 7:43 am 6
http://www.vancouversun.com/business/Real+estate+numbers+signal+slowdown+analyst/6731296/story.html
“Somerville said he can’t pinpoint a specific reason for the sales slowdown, but that factors could include a lack of faith in the economy, a slowdown in offshore investment or buyers refusing to pay high prices”
Yes, it’s so overwhelming trying to figure this out, so much so. that I think it’s best we call our local agent who is highly trained in these complex issues of economics.
But better still, we best get Cam to televise another helicopter trip around the Lower Mainland, but please this time take Levy and Bill Slut along
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June 6th, 2012 at 7:51 am 7
http://news.vanpeople.com/?action-viewnews-itemid-194902
I am starting to see more and more price drop news on Vancouver’s Chinese blog.
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June 6th, 2012 at 7:53 am 8
Isn’t Tsur Somerville someone many on this site love to hate? Seems like all along he was just doing his job, being a neutral market observer.
And he has been correct about the market year after year, unlike others who were wrong year after year.
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June 6th, 2012 at 8:02 am 9
http://realestateagentsincars.tumblr.com/post/24540551730
Is your realtor light and fluffy, hard and crusty and prickly, or firm and crisp?
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June 6th, 2012 at 8:07 am 10
@Bull! Bull! Bull!:
“Seems like all along (Tsur) was just doing his job, being a neutral market observer.”
Somerville’s job (paid by the taxpayers) is a professor of business administration at UBC. As such he is supposed to pay attention to the established principles of economics and finance, not to be a “neutral market observer”.
You comment is like saying that a professor of medicine at UBC ought to take a neutral position as to whether HIV causes AIDS.
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June 6th, 2012 at 8:22 am 11
I am one of those buyers who refuse to pay today’s prices.
I refuse to get a huge mortgage, waste hundreds of thousands on interest payments, and piss away what little equity in case of a market downturn.
Instead, I just rent and go on nice vacations now and then to get away from increasingly impatient, juvenile, and plastic real-estate town called Vancouver. The money I spent on trips would be peanuts compared to what I could potentially lose if I bought a house now.
In the worst case where there is no crash, I’ll be fine because I stopped being fixated on the idea that I HAVE TO stay in Vancouver. With enough research and efforts, I can always find professional opportunities elsewhere. I can think of many other “Best place on earth”.
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June 6th, 2012 at 8:36 am 12
@Anonymous:
Is it real or u are bs? Do you have money for breafast?
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June 6th, 2012 at 8:37 am 13
@patriotz: I think you’re being a bit hard on him. It matters not where his salary comes from he’s entitled to study the market and come to his own conclusions. Unless you are saying someone is paying him to come to these conclusions? Or that he is completely inept? Which I think you’d like to say but only because you disagree so strongly with him.
I don’t have to tell you that being wrong is both part of economics forecasting and being in a bubble. He may be like every other economic forecaster in the US who could not see the bubble. If we’re in a bubble the mania would certainly spread even to academia in the form of a type of euphoria that a new model was being established.
And we’re not out of it yet. With China lending, it may still go on, or heaven forbid a new model may be underway! (Just joking about that last bit… but only a little… emerging markets, their corrupt money, and the search for a safe haven globally, really are the joker card for Vancouver RE).
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June 6th, 2012 at 8:43 am 14
@Many Franks: I would like a REALTOR® who is firm and confident, a REALTOR® who will work hard for me, and who understands the need, in modern times, for short-term relationships with multiple REALTORS®.
I would like a REALTOR® with a strong sense of purpose, and whose FeeFlex program puts me in the driver seat (since letting the REALTOR® drive will apparently involve turning in a big circle until the camera runs out of batteries.)
I would like a REALTOR® whose eyes look past me and into my soul, whose crisp suit masks a lithe, glistening body, whose muscular thighs w
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June 6th, 2012 at 8:45 am 15
@mac:
“He may be like every other economic forecaster in the US who could not see the bubble.”
I quite agree – wilfully blind.
There were plenty of academics and forecasters in the US who did see the bubble using simple metrics that can be understood by anyone with basic math skills.
That someone in Canada could ignore such metrics after their efficacy was proven in the US is inexcusable.
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June 6th, 2012 at 8:48 am 16
It’s done! Let the erosion begin. Psychology will take this sucker down just like psychology drove it up. I get to rub their freakin’ noses in it. I’ll take great pleasure in it too as many times in the past few years “dummy” ‘ol me was frowned upon for issuing practical warnings. Can anyone else on here relate this this?
Thanks to the many “Bearish” posters on here for tirelessly sticking to your rational arguments regarding this idiotic real estate bubble.
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June 6th, 2012 at 8:56 am 17
Given that Bernanke and co are about to press Ctrl-P, this will change very quickly as all the HAM floods back into hard assets like RE. As expected, Flaherty and Carney are going to do nothing but sit on their hands and smile.
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June 6th, 2012 at 9:03 am 18
If china does engineer another bubble of sort it’ll be within their own country, they’ll restrict capital outflows as much as possible. They wouldn’t want people to make money in china and ship the jobs out to other countries when they’re in a crisis.
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June 6th, 2012 at 9:06 am 19
@Turkey: And here I was thinking that a bakery metaphor would be more appropriate than a snowflake — although it looks like you were about to get to the part about the wooden spoons, batter, and steaming buns when you were cut off.
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June 6th, 2012 at 9:17 am 20
@Many Franks: I would like a REALTOR® who has mastered the “French Roll”. Happy?
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June 6th, 2012 at 9:19 am 21
@Turkey: Happy with a big “H”.
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June 6th, 2012 at 9:26 am 22
“We’re in a market that’s much slower than what we’re used to and I think that will transfer into much more sluggish prices, at best.”
Does this mean anything at all?
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June 6th, 2012 at 9:32 am 23
For those overextended home owners out there (you know who you are), please use this upcoming surge in buying as an opportunity to lighten up your RE portfolios. While you at it, sell some of your stocks too. Consider this a get out of jail free card from the heavens. I suggest you use it wisely. For the mo-mo idiots out there that see this as an opportunity to double and triple down, you fully deserve what is coming.
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June 6th, 2012 at 9:37 am 24
In these recent Bears versus Bulls discussions, I think we have been focusing on the wrong animal.
In fact, smart bulls have already cashed in their chips and despite what people like Larry MacDonald say, bears have little influence on this market.
Let me tell you folks. The animal on which we should focus is the pig.
It is pigs that have gorged on cheap credit and driven up prices. It is pigs that now have unreasonable expectations of gains. But this will all change. As the old saying goes “Bulls make money, bears make money, pigs get slaughtered.”
I’ll fire up the BBQ.
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June 6th, 2012 at 9:44 am 25
I’m very curious about the changes to the HPI Benchmark. For years and years we had a system that was internally consistent and could be used to compare historical price changes.
Why was it changed and why can’t they seem to get it right? Now it needs to be ‘recalculated’ regularly and doesn’t seem to have any consistency any more.
Are they really that incompetent?
I know some of you think its a conspiracy and their fudging the numbers to make them look better, but that seems even dumber than incompetence. What would be the endgame there? That would just make a dropping market look even worse by faking the peak higher.
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June 6th, 2012 at 9:55 am 26
@Anonymous: Local economists like Tsur Sommerville will never say anything unambiguous or damning until well after the fact. Then, he will be very specific about the reasons the market melted down. Right now, he wants to avoid creating a stampede (or contributing to the one likely underway). Same goes for that other talking head, Pastrick.
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June 6th, 2012 at 10:00 am 27
Trying to decipher this HPI. Looks like they calculate and HPI based on a ‘basket’ of RE features (# of bedrooms, land size, view etc.), which is analagous to the CPI. Then they use this index to calculate the theoretical value of a benchmark or ‘average’ home in each sub-area. My understanding is that it’s this ‘benchmark’ calculation that has changed due to their feeling that the benchmark home doesn’t correctly represent the average home. The HPI calc hasn’t changed, though it still shows increasing prices, while averages and medians are dropping. Still waiting to see if they explain this discrepancy.
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June 6th, 2012 at 10:08 am 28
@Scott:
“That would just make a dropping market look even worse by faking the peak higher.”
I don’t really have an opinion on what they are doing with the HPI calculation, but as someone pointed out a few days ago, a sharply falling market may well be more attractive to real estate agents than a moderately falling market, as there is greater incentive to ACT NOW! Low sales volume is much more of a problem for real estate agents than low prices.
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June 6th, 2012 at 10:37 am 29
@patriotz: patriotz, not sure why you are being so hostile. I’m not interested in debating semantics with you. Instead let’s talk about the people who for years insulated Somerville, accused him of bias and incompetence.
All this despite him being right, again and again. I think some people owe Somerville an apology. He’s one of the good guys. Not one of the bad guys.
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June 6th, 2012 at 10:54 am 30
@patriotz: “That someone in Canada could ignore such metrics after their efficacy was proven in the US is inexcusable.”
Nothing like pent-up feelings of superiority over “dumb Americans” to justify how events have unfolded.
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June 6th, 2012 at 10:57 am 31
@Bull! Bull! Bull!: ” I think some people owe Somerville an apology. He’s one of the good guys. Not one of the bad guys.”
There are wonderful quotes archived here and on vreaa that can be used to indicate how certain expert positions subtly change. The distress in the market was becoming evident a while ago but there was crickets.
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June 6th, 2012 at 11:31 am 32
@jesse:
There’s no honor in calling the top after the fact.
It serves no investor, and particularly the first time buyer who has no equity to spare.
Up until today, he was a pumper and no better than Cam Muir.
His job was to sound the alarm two years ago, to warn buyers that prices were unsustainable, so they could plan accordingly.
That’s why Tsur Sommerville’s is garbage amongst those in the know.
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June 6th, 2012 at 11:40 am 33
I know this is a bit off-topic but, wow the animosity is building between the Harper Conservative government and South Asians. What’s even more shocking is the story below indicates growing tensions between South Asian and East Asian immigrants.
This is from a mainstream ethnic newswaper:
“OTTAWA – The Stephen Harper Conservatives have once again insulted the Indo-Canadian community by flat out refusing to give an official apology for the racist Komagata Maru incident, something they so willingly did for the Chinese-Canadian community over the racist Head Tax policy.
It shows that the Conservatives, including their loud mouth immigration minister Jason Kenney – aka the Minister of Deportation – clearly think that Chinese-Canadian vote is more important and are treating Indo-Canadians-South Asians as second class citizens, continuing the discriminatory history of the Komagata Maru.”
http://thelinkpaper.ca/?p=16948
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June 6th, 2012 at 11:43 am 34
@Troll: Taken from the REBGV’s website;
“This type of pricing model involves estimating the price of a property’s features rather than the property itself.”
Won’t this lead to a great deal of subjectiveness? How do you quantify a view (or type of view) or closeness to a school?
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June 6th, 2012 at 11:44 am 35
Couple anecdotes:
Friend in Kootenays is trying to sell 2nd property, no bites after months and on 4th round of price reductions. Reluctant to go below what they owe, he’d like to break even but the longer it goes… he has renters in it and has had tons of issues with renters like property damage, skipping on payments, leaving without notice, noise complaints, etc…
Another friend bought property with renters in, they’re renting for time being before they’ll move into the home in the fall. The property was appealling for a number of reasons one of which was that it came with renters paying the mortgage, perfect! Since taking it over they’ve been dealing with a problem renter constantly calling them to voice complaints over… well… everything! They’ve had to shell out quite a bit of dough to simply deal with some of his complaints and are now considering evicting him ahead of schedule. Meanwhile, these Trumps are just finding out now what the utilities costs are… you see, the seller never provided them with that info when they asked…. brilliant!
Enjoy the landlord business, I hear it’s everything it’s cracked up to be and much,much more!!
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June 6th, 2012 at 11:45 am 36
@patriotz: bears are hostile to any views that contradict theirs. patriotz, the armchair economist, has to moves to different places so many times to survive, he is now unemployed in ottawa.
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June 6th, 2012 at 11:56 am 37
@jesse: “There are wonderful quotes archived here and on vreaa that can be used to indicate how certain expert positions subtly change.”
And how wonderful would your archive of quotes look, jesse? Would it show someone who understands the market, or someone who is wrong year after year?
How does your record compare to Somerville’s? How many years have you been right and how many years has Somerville been right?
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June 6th, 2012 at 12:01 pm 38
Good news,4575 Dumfries sold for 900000,a well maintained house built in 1948,was grabed by lucky Chinese new comer in biding war,and sold within two wks.Bears face the reality and stop spreading fear and lie.The will be torn down and new house will be in market soon for 1.3 millions which will break presnet bench mark for East Vanocouver area.Conratulation for the new owner.
cheer
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June 6th, 2012 at 12:10 pm 39
Somerville in the summer of 2008: http://www.thestar.com/News/GTA/article/499739
Can we please put a stop to all of the “Somerville is right year after year” talk now?
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June 6th, 2012 at 12:16 pm 40
and i repeat..
“Tsur Somerville was just on Global and said not to believe the hype, that thinking the prices were going to come down by 10-15% was wishful thinking by buyers.”
i posted the above quote on May 16th, and like I’ve said before, “markets turn on a dime” (and so do “experts” opinions”
On another note, the two apartments that are listed in my building are still for sale, one has been listed for about 4 months and the other about 7 weeks…not one low-ball offer on either.
Oh, and the apartment building across the street just put a reduced sticker on the “For Sale” sign that’s on their lawn.
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June 6th, 2012 at 12:32 pm 41
@Bull! Bull! Bull!: “How does your record compare to Somerville’s?”
Prices are too high compared to rents, that’s my message at the core, and I’ve been consistent on this for the past 5 years.
Not everyone in every area in the Lower Mainland who has bought in the past 5 years will have done well; for those who have continued to rent, they will, on balance, have saved more than the owner, in part because ownership costs extend beyond mortgage and property taxes. Not true with SFHs in core municipalities, so… just saying… maybe it’s time to leave the casino.
So, as anti-climatic as it sounds, the bearish position has been right, except for where it has been wrong. But right enough and looking to be more right in the months ahead.
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June 6th, 2012 at 12:43 pm 42
One for the Vancouverpricedrops.com site. . .
V953159
7040 Livingstone Place Richmond
Listed – 1,418,000 – November 11, 2011
Sold – 1,050,000 – June 5, 2012
Bought 5-May-2009 for 890,000 (This was the last bottom of the market)
Assessed Value – $1,301,000
Somehow – this property requires a $190,000 renovation however, still quite the price drop. Wonder perhaps if this was an inspection on a previous failed sale that raised this to light – but anyhow – a serious drop below assessed and even with $200K repair – this goes out $50,000 under assessed.
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June 6th, 2012 at 12:46 pm 43
@vangrl: If price will fall dramatically as you guys said,why my neighbor on 4575 Dumfries for 900000,remeber it is just a clean and well-maintained house built in 1948.It is a Reality and not bull shit as you guys.Face the reality.
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June 6th, 2012 at 12:49 pm 44
@ZRH2YVR:
Still a 160000 profit no bad,much better than you guys washing dish and spitting BS on day-off for nothing free.
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June 6th, 2012 at 12:50 pm 45
@Anonymous: How can you have a ‘bidding war’ on a house that was listed at $899K and sold for $900K?
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June 6th, 2012 at 12:52 pm 46
@Anonymous: It is indeed reality that there are still some idiots buying. Take those blinders off, it will all become clear.
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June 6th, 2012 at 12:58 pm 47
@ZRH2YVR: After fees and holding costs, that’s not exactly a stellar return; they would have been better off in stodgy old long bonds.
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June 6th, 2012 at 1:18 pm 48
@Common Plains Ape:
A 60 yrs plus can sell for 900000,a brand new east side house should be priced at 1.4 million.land would cost 800000 at least and material is another 500000
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June 6th, 2012 at 1:24 pm 49
@Anonymous:
$160,000 gross profit. Let’s consider the carrying costs for 37 months. Say $4,000 a month including mortgage payment, utilities, insurance and upkeep… that’s a total cost of $148,000 so in 3 years and 1 month that investment gained them $12,000 net.
Wow.
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June 6th, 2012 at 1:25 pm 50
@jesse: Bull Crap. You’re on here day after day analysing, predicting, and criticizing. For what purpose? You have zero predictive power, your analysis is seriously lacking.
You could have spent that time picking bottles and cans from your neighbours recycling bins. At least then you’d have something to show for it.
You’ve decided to rent. Great. Rent and do something useful with your time like collecting bottles and cans.
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June 6th, 2012 at 1:27 pm 51
@Vansanity: You’re assuming nobody lived in it for 3 years? Nonsense.
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June 6th, 2012 at 1:28 pm 52
@Vansanity: ….and they didn’t pay down any mortgage principle in that time? Nonsense.
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June 6th, 2012 at 1:37 pm 53
@Vansanity:
“Let’s consider the carrying costs for 37 months. Say $4,000 a month including mortgage payment”
Mortgage “payment” isn’t a carrying cost. Only the portion of it which is interest.
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June 6th, 2012 at 1:40 pm 54
@patriotz:
“Your comment is like saying that a professor of medicine at UBC ought to take a neutral position as to whether HIV causes AIDS.”
Exactly.
Scientific journals take very seriously the issue of conflict of interest in publication. Any potential conflict of interest, such as a grant or contract from a related industry, must be disclosed. This is of particular importance in the pharmaceutical industry, where the end user needs to know whether researchers had a vested interest in drawing a particular conclusion regarding drug safety or efficacy.
I know that the real estate business has much lower standards, with practices allowed that would be illegal for most other types of investment. But it must surely be a breach of Tsur Somerville’s UBC contract if he has received grants and contracts from real-estate-related industries and then published favourable conclusions that have no economic justification. This should be investigated.
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June 6th, 2012 at 1:40 pm 55
@Bull! Bull! Bull!:
“You’ve decided to rent. Great. Rent and do something useful with your time like collecting bottles and cans.”
I would rather spend my time here and hope the market correct itself. 30% on 1M is how much saving? That’s 6M of 5cents cans. Not including the extra you that you pay for interest… You can work on the math on how many tons are there
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June 6th, 2012 at 1:42 pm 56
@Troll:
“How can you have a ‘bidding war’ on a house that was listed at $899K and sold for $900K?”
I guess all the initial offers were under asking price.
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June 6th, 2012 at 1:44 pm 57
@jesse: All this slagging of failed predictions is a waste of time, since there’s plenty of them from both bull and bear camps.
I do agree that there’s a serious lack of balanced analysis from so-called experts like Tsur. It would be nice to hear some more grown up discussion of metrics and risks associated with RE without needing to delve into specific useless predictions. Maybe those failures are at the Global/Van Province level where the soundbite and sensationalism rules supreme. Surprisingly, some of the best domestic analysis of our housing market comes from some of the bank housing reports.
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June 6th, 2012 at 1:48 pm 58
@Troll: Somerville is interviewed for a few short quips on the local news. We can be critical of the quotes that make it but, from what I’ve seen with others being interviewed they leave with a sense their POV was not accurately captured.
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June 6th, 2012 at 1:50 pm 59
@Troll:
Have you ever had a mortgage? If yes, good luck to paying down any principal in the first few years.
And yes, I’m assuming they lived in the home not rented it out. If it was a rental then there are taxes we should consider.
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June 6th, 2012 at 1:54 pm 60
Any predictions as far as Paul’s numbers this evening? This is getting fun
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June 6th, 2012 at 1:55 pm 61
So nothing is about to change on the mortgage front…
Regulator eases proposed new mortgage regulations
Let people pile on more debt… pathetic!
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June 6th, 2012 at 1:57 pm 62
@Bull! Bull! Bull!: “You’re on here day after day analysing, predicting, and criticizing. For what purpose? “
Because the prices do not line up with cash flows. Data-driven analysis stands on its own merit. As I mentioned, if people followed freako/patriotz/VHB’s advice in 2007, for most areas of the province, they will now be ahead. It might seem odd but those are the numbers I’m seeing. For some areas, yes, people who followed bearish advice will be behind… assuming they sell.
And foremost, past performance is no indication of future performance. Do your own analysis; the data are there for people to make up their own minds. If they’re too stupid to listen to the likes of me and not critically review the analysis, well, TS.
“You’ve decided to rent.”
I don’t rent.
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June 6th, 2012 at 2:02 pm 63
@Makaya
Vancouver is screwed either way. Too much debt already, they had a chance to save some people from piling on more debt before an eventual collapse, now they’ll have to deal with a bigger collapse when it happens.
When house prices collapse banks will even be in more trouble, and you can definitely expect a CMHC bailout.
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June 6th, 2012 at 2:04 pm 64
@Vansanity:
Oh god, it’s even worse than I thought, you don’t even see the blinding gaps in your ‘analysis’ even after they are pointed out.
Can’t believe I have to spell it out, you need to subtract out:
- the rent they didn’t have to pay over those three years. Let’s say $3000/month equals $111,000.
- the principal they paid down. If they mortgaged $800K, that’s still around $50,000 over three years.
To be fair, you probably should add back in some transaction costs, let’s spitball $40000.
That still leaves a net of your $12K + $111K + $50K – $40K = $133K. So you’re only off by about a factor of 10!
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June 6th, 2012 at 2:57 pm 65
@Simple:
All the local talking heads do is predict that the market will continue in the same direction that it’s been going in the last few months. Since RE cycles move very slowly, that makes them right 90% of the time. And it also makes them completely useless.
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June 6th, 2012 at 3:10 pm 66
65 patriotz: Exactly. They only risk their taxable expertise at the transition points, staying right through the long periods it doesn’t matter. On the other hand, when self-proclaimed economists discuss ‘faith’ as a market force as Tsur does in his quote, it’s charity to suspect serving two masters. The alternative is congenital. And it’s not just one article as some suggest, a long history of speaking like market apologists for the development industry removes them from any serious consideration as academics. Tobacco company medical experts impress poorly in media too.
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June 6th, 2012 at 3:21 pm 67
@Troll:
“Maybe those failures are at the Global/Van Province level where the soundbite and sensationalism rules supreme”
Of course. Their objective is to sell newspapers and advertising.
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June 6th, 2012 at 3:22 pm 68
@Vansanity:
“Have you ever had a mortgage? If yes, good luck to paying down any principal in the first few years. ”
For a 20yr mortgage you pay roughly 50:50 interest:principal from day 1.
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June 6th, 2012 at 3:24 pm 69
@Anonymous:
Regardless of down payment or amortization schedule, your interest cost is always on the full amount of the purchase price because of the opportunity cost of the principal payments.
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June 6th, 2012 at 3:25 pm 70
@investigate Tsur:
“But it must surely be a breach of Tsur Somerville’s UBC contract if he has received grants and contracts from real-estate-related industries and then published favourable conclusions that have no economic justification.”
In addition Tsur should disclose what real estate he owns, where it is and when he bought it.
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June 6th, 2012 at 3:28 pm 71
@patriotz:
“Regardless of down payment or amortization schedule, your interest cost is always on the full amount of the purchase price because of the opportunity cost of the principal payments.”
What was the opportunity cost of investing in stocks last month?
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June 6th, 2012 at 3:30 pm 72
@Anonymous:
“What was the opportunity cost of investing in stocks last month?”
The same as investing in RE.
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June 6th, 2012 at 3:33 pm 73
@Anonymous:
“What was the opportunity cost of investing in stocks last month?”
Close to zero? Work like am ATM, if you know what you are doing. Buy List: ZSL (ultra short silver 3x), GLL (ultra short gold), and SPX (ultra short S&P 500).
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June 6th, 2012 at 3:54 pm 74
OSFI caves:
http://business.financialpost.com/2012/06/06/osfi-relents-on-tougher-heloc-rule/
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June 6th, 2012 at 4:04 pm 75
@Anonymous: “For a 20yr mortgage you pay roughly 50:50 interest:principal from day 1″
…at current interest rates.
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June 6th, 2012 at 4:19 pm 76
The OSFI note is here: http://www.osfi-bsif.gc.ca/app/DocRepository/1/eng/notices/osfi/b20_nlet_e.pdf
So… did they cave on that one?
HELOCs >65%LTV are going to need to be amortised. This would have been a big problem because of the prevalence of investment accounts tapping revolving credit (e.g. Smith).
Sounds good, though this would be nothing analysts and superintendents don’t already know.
Appraisals need to consider downside price risk and avoid exclusively using comparables if sales prices are expected to be ephemeral.
These guidelines as amended will have tangible impact on property markets, especially ones where values look a bit detached from fundamentals, like Vancouver’s.
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June 6th, 2012 at 4:23 pm 77
Good news for Vancouver Real Estate:4833 dumfries sold for 850000;”a tear-down,built in 1940 or earlier.Bear face the reality.More will be sold around 33 and knight in July.
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June 6th, 2012 at 4:41 pm 78
@jesse:
Sure….but the analysis is from holding a prop from 2009 to today.
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June 6th, 2012 at 4:42 pm 79
One bubble popped (vancouver), another to go (toronto):
http://business.financialpost.com/2012/06/06/one-housing-bubble-down-one-to-go-rosenberg/
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June 6th, 2012 at 4:47 pm 80
@Troll: “.but the analysis is from holding a prop from 2009 to today”
So… they would have had higher interest rates on the loan then.
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June 6th, 2012 at 4:57 pm 81
@Vansanity:
“And yes, I’m assuming they lived in the home not rented it out.”
That does not mean there was no rental income. If they lived in the home they did not pay rent on another home. That savings is the same as having received the rent from someone else, and has to be included in your calculation.
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June 6th, 2012 at 4:57 pm 82
@jesse: Yeah…..you’re right, rates were higher in 2009, my bad. So knock some principal repayment off the calcs, Vansaity is still off by quick a bit.
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June 6th, 2012 at 5:08 pm 83
I’m glad the bubble has popped. I look forward to seeing caucasian baby boomers crying on GlobalTV
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June 6th, 2012 at 5:15 pm 84
Re: Tsur Somerville
There are other things to consider regarding Tsur Somerville. It is not about his price direction predictions which have been hit and miss. He did miss the 2008 correction for example.
The real problem with TS and others is their failure to acknowledge the obvious that real estate is overvalued and in a bubble. It is fair enough to predict prices will rise short term but if you attribute it to running out of land as he seems to do so often then he is completely off base. He never talks about what might happen when interest rates rise or how rents and prices don’t jive. Based on overall analysis everyone around here has got it much more right than TS by a long shot. He is either incompetent or corrupt.
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June 6th, 2012 at 5:22 pm 85
@Troll: Include opcost on the DP as well but yes the return over that time wasn’t horrible — lumping it as zero coupon the investment was about 2.5% annualized over risk-free, about half through capital appreciation — though risk adjusted I think they were lucky; I would have expected 2X that spread annualized at least if it’s a nice area.
The ones who are holding now… we’ll have to wait and see.
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June 6th, 2012 at 5:22 pm 86
@Troll:
“Sure….but the analysis is from holding a prop from 2009 to today.”
What’s that got to do with it? Their mortgage would still have been amortized over a number of years. I was just trying to show another poster that the “nobody pays off any principal in the first few years” argument is heavily dependent on the amortization period.
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June 6th, 2012 at 5:25 pm 87
@jesse:
“So… they would have had higher interest rates on the loan then.”
.. and potentially an IRD penalty to pay if they discharged a closed mortgage before the end of its term.
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June 6th, 2012 at 5:27 pm 88
So it’s come to this ‘balanced’(ROFL) market. I have a couple comments on some of the idiotic posts I’ve been seeing lately.
Praising Tsur and Pastrick for being right for the last 5 years is completely wrong. If Tsur says today that the market has topped, it is impossible for everyone to sell at the top. Therefore as the market falls, his ‘correctness’ from the last few years switches to WRONG.
When prices fall 10%, advice to people to buy in the last 2 years changes from ‘right’ to WRONG.
When prices fall 20%, more of his declarations into the past are WRONG.
The farther they fall, the longer into the past his opinions are WRONG. Since renting saves you more money than buying, when prices return to the purchase prices, you are ahead by renting.
Now on to the more (or less) interesting comment form me. (depending on your interest level)
I’m one of those so called bitter renters. I have chosen to rent because I believe that living close to work is important for family health reasons. Our household is also loosely budgeted with the idea that the wife can stay home if she chooses. As we have a young child now, she is choosing to do that for the near future.
An opportunity came up at work for a company transfer to the US of A. Company transfers are pretty sweet. Most expenses are covered. Moving to a state with 0% state income tax, and homes cost oh, 75% less than they do here.
It’s a tough decision, lol. But you know, sacrifices have to be made.
I work in the software industry, and as I’m preparing to move away, I’ve been in informal discussions with some of the higher ups in my company, and in the discussions I’ve heard that other high tech employees are leaving the company (and the lower mainland) due to the stupid cost of living here. These are the shining star employees that are fleeing, as they are the ones with the skills and talent to get better work opportunities elsewhere.
Just in regular meetings, it’s come up with the upper level management, that the housing in vancouver is just CRAZY, and they worry for their children’s futures. Not only do they consider the housing to be CRAZY, but the also point out that salaries are out-of-proportion low. (Those two are likely related.) Also other general feelings that commutes are taking longer. Commutes from white rock to richmond used to be 30 minutes outside of rush hour, but in the past few years, it’s consistently been 45 minutes instead. (outside of rush hour)
VREAA I know you’re reading this, and I’d likely be interested in contributing to a series about my experiences in this new place outside of the ‘Best Place on Earth’, if you deem my writing style and content worthy of publishing.
In any case, after waiting so long and quite a large amount of marital stress over housing, we’re moving away.
I gotta say, at first it was a hard sell with the spouse. She didn’t want to leave her friends, but then she saw the shopping, the beaches (wow!) and um, the housing down there. And she came around.
There’s a lot more to write about. Differences in taxes, health care, car insurance, property taxes, and those HOA fees. Bottom line though, I’ll be paying a LOT less interest when I purchase down there. Credit ratings may be a bit of a challenge. Seems even with large DP’s you need a good credit rating for the best mortgages.
Good luck to all intelligent posters.
And bye bye ‘Sheriff’ Dave. I will miss your insight-lacking drivel. Actually, I won’t, I’ll still be hanging around these forums. I’ll just have to observe from a distance as the meltdown progresses.
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June 6th, 2012 at 5:29 pm 89
@investigate Tsur:
But it must surely be a breach of Tsur Somerville’s UBC contract if he has received grants and contracts from real-estate-related industries and then published favourable conclusions that have no economic justification. This should be investigated.
That investigation is very easy to do. Somerville is Director of UBC’s Centre for Urban Economics and Real Estate. Who sponsors CUER? Not hard to find out:
http://cuer.sauder.ubc.ca/sponsers.html
Grosvenor, Polygon, Canadian Home Builders’ Association and Greater Vancouver Home Builders’ Association.
“Through their support and generosity, the sponsors provide the foundation for the Centre to achieve our goals and objectives.”
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June 6th, 2012 at 5:29 pm 90
May be Tsur believes in his own stories. I know someone who works at the School of Business and bought at the peak expecting substantial gains b/c of “the long term impact of HAM.” Being a scholar does not always protect one from the collective narratives of one’s community.
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June 6th, 2012 at 5:34 pm 91
@Anonymous: “May be Tsur believes in his own stories.”
Which means he is incompetent and should not be in his current position.
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June 6th, 2012 at 5:34 pm 92
New Listings 281
Price Changes 163
Sold Listings 82
TI:18921
http://www.laurenandpaul.ca
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June 6th, 2012 at 5:37 pm 93
@YLTNboomerang: ….One bubble popped (vancouver), another to go (toronto):….
Isn’t if funny that none of the ‘experts’ started crying ‘bubble’ until Toronto started to go nuts. The fact that Vancouver buyers have been demented for a decade didn’t seem to get noticed. Proving once again that the folks in Toronto need lots of sunscreen on their calfs (since the sun obviously shines out their collective asses).
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June 6th, 2012 at 5:39 pm 94
@paulb:
3 straight days of dismal data… The market is officially dead…
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June 6th, 2012 at 5:39 pm 95
@Anonymous: …Being a scholar does not always protect one from the collective narratives of one’s community. ….
Those who can, do. Those who can’t, teach.
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June 6th, 2012 at 5:40 pm 96
On track for fewer than 2000 sales, based on projections using the 7-day moving average. Ouch. The MoI at today’s pace is 9.53. Ouch ouch. Might hit 10.0 soon….
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June 6th, 2012 at 5:40 pm 97
@paulb:
Wow. This market is so cooked.
82 new greater fools.
Looking forward to the 19k party tomorrow!
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June 6th, 2012 at 5:55 pm 98
Don’t bother visiting: it barely stands up:
http://www.realtor.ca/propertyDetails.aspx?propertyId=12012987&PidKey=-2059429815
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June 6th, 2012 at 6:01 pm 99
9.53 MOI wow how balanced is that?
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June 6th, 2012 at 6:05 pm 100
@curious lurker: Why don’t you rent for a while until you have a credit number built up, then buy. It will save you a bundle in refinancing fees in three years.
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June 6th, 2012 at 7:27 pm 101
Well, at LEAST GLOBAL TV NEWS is soldiering on…
On tonight’s 6 0′clock News Hour, Deb Hope seemed a tad “startled” to announce that maybe, just maybe, there IS a RE bubble in YVR and it’s “bursting”?
Quick diversion…they showed a house under construction on Point Grey Rd. with an “assessed value” of 37,000,000…head shots of “wise-looking” neighbours. They even interviewed a few. “Well, I’m not surprised!”or, “Really? That much, eh?”
THEN, the REAL talking head showed up. You guessed it, CAM MUIR!
He set everyone’s minds at rest, though. In othr words, “a flat market” or “stable pricing” or some other such nonsense. Phew!
They just won’t give it up, will they?
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June 6th, 2012 at 7:41 pm 102
Hey, wasn’t it something like 10 MOI that we needed for the serious erosion to begin? Party on Jack!
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June 6th, 2012 at 7:43 pm 103
RED DOT POPS UP ON THE WEST SIDE!
If you have spent ANY time on MLS you will know that there hasn’t been a freehold detached house listed on the West side for less than $1,000,000 in a very long time. Well now there is.
Check out V954500 – The little canary house in the coal mine.
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June 6th, 2012 at 8:05 pm 104
Ah, good ole Tsur. Tsur is the type of guy that walks outside on a rainy day and proclaims that its going to rain that day. He goes with the momentum of the recent data (or at least the perceived market sentiment) . He is not one for bold or contrarian predictions. He is the milque toast of economists. Not that I can blame him. The market hasn’t made sense in 8 years and trying to predict what will happen to YVR RE is impossible. Economics is not an exact science. Most economists are talking out of their asses, IMO. They try to apply rational models to markets that are imperfect, lacking information, and driven by factors that are not based on fundamentals (i.e. market psychology).Then when their model doesn’t explain the actual outcome they just make shit up (HAM, lack of HAM, HAM moving from Richmond to West Van etc)
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June 6th, 2012 at 8:11 pm 105
@curious lurker:
[Quote]In any case, after waiting so long and quite a large aount of marital stress over housing, we’re moving away.[/Quote]
You’re lucky. If I had a clear path to the US I would be there in a heartbeat. Canada has nothing to offer young people right now. Real estate is overvalued (everywhere, not just YVR) and unless you’re in natural resources there is nothing going on economically for a young person looking to make their mark. As long as you have a decent job, the US is good place to be right now. Salaries are better down there. Greater diversity of jobs/industries. Property values are low and you can deduct your mortgage interest. That’s just a few of the economic advantages, there are many more. Besides, if you really hate it down there you can always come back. Maybe by then real estate will actually be at sane levels.
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June 6th, 2012 at 8:12 pm 106
@AG Sage:
I think we will choose to rent for at least the first year.
It just makes sense to take a little bit of time to get familiar with the area before committing to buying a place we have to live in for a long time. It does seem that monthly costs are really high in the area we are moving too.
Maybe we won’t like it down there. Who knows, leaving may open our eyes to the truth that Vancouver really is the BPOE. I’m thinking likely not. I’m looking forward to the adventure of being someplace new and different. Life should be fun and exciting. 30+ years of debt is just not for me. It’s really amazing how much Vancouver demonstrates the ‘emperor has no clothes’ children’s story. Who will be the little boy that points out the obvious to the entire kingdom?
I look forward to that TSN turning point!
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June 6th, 2012 at 8:23 pm 107
@Simple:
“Check out V954500 – The little canary house in the coal mine.”
Is that actually a detached? In the description (all caps, thanks for yelling Mr. Realtor) its described as a townhouse?
And am I crazy or is the last photo in the sequence a pic of an entirely different house? It has a red roof and no houses right beside it.
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June 6th, 2012 at 8:41 pm 108
@Selma Bouvier:
It is described as a “townhouse alternative,” which I would have thought meant an alternative to a townhouse, being small and “cheap” like a townhouse, but not a townhouse.
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June 6th, 2012 at 8:55 pm 109
That the housing market is about to plummet makes me feel a bit dismal. Must we now go on waiting for years for prices to come down to a reasonable level? I’ve had so much patience so far…my current housing situation is not great-two kids in a two bedroom apartment. We’ve been looking for other suitable accommodation but haven’t come up with any great solutions. Right now the place we’re in is ideal-great location, great landlord who won’t be selling anytime soon (it looks like), and the rent’s decent. We’re just in need of more space (I also work from home). I’m loathe to look for YET ANOTHER rental, where the landlord will likely be 1) not great, a pain to get ahold of when something goes wrong 2) about to sell, but shiftily tells you they’re not thinking of that at the viewing, then you sign the rental agreeent or 3)amateur landlord, therefore the place is overpriced. What’s the solution? My significant other seems to think we can get ourselves into a house within 2 years (ha), but I highly doubt that modest bungalow now selling for $1.25 million in our hood will drop to a reasonable level anytime soon.
The bubble…was so interesting to study, now it’s just a pain in my a** in real life. What to do while the show’s going on for the next few years…
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June 6th, 2012 at 8:57 pm 110
@Anonymous:
Don’t worry it will be gone next wks friday and snatch up by Chinese.
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June 6th, 2012 at 9:07 pm 111
Is it just me or do many of these listings have suspect estimates of square footage. I don’t know how many times I have seen a 3000 sf+ house listed in Vancouver when there is no way such a house could be so big. (esp on a 32′ wide lot)
Are there loose rules in BC on quoting square footage on MLS?
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June 6th, 2012 at 9:10 pm 112
@Initia Nova: In Vancouver, the finished basement is included in the square footage. So, this is more like a 1000 sqft home, I’m guessing, by standards elsewhere in the country.
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June 6th, 2012 at 9:13 pm 113
@Mortgagee
Ok thanks, that makes more sense.
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June 6th, 2012 at 9:16 pm 114
@ pricedoutfornow
On the flip side, you could be under water in a depreciating asset, pulling the curtains shut so you don’t have to watch the happy couple on the lawn across the street closing a deal for 40% less than what you paid.
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June 6th, 2012 at 9:19 pm 115
@pricedoutfornow: Move to another destination. We got tired of the Lower Mailand and the exact type of living you’re doing and I found a better job in Calgary. We rent a 4 bedroom house for $1500.00 a month.
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June 6th, 2012 at 9:20 pm 116
@Navin R Johnson:
MOI isn’t 10 yet. Thats one poster’s month-end projection based on the first few days of June.
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June 6th, 2012 at 9:20 pm 117
@curious lurker: I moved away a little more than a year ago. My preconceived notions of how much I would miss Vancouver turned out to be nothing like reality. Sure I miss my good friends and family that live there, but everytime I go to visit I’m so glad to leave and return home.
Vancouver is nice, but it sure ain’t worth the cost.
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June 6th, 2012 at 9:21 pm 118
I definitely prefer watching this bubble implode from the outside
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June 6th, 2012 at 9:26 pm 119
@Escapee:
Do you think Vancouver rents are expensive?
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June 6th, 2012 at 9:27 pm 120
Copied from PaulB’s number. Thank you PaulB.
http://www.laurenandpaul.ca
http://tinyurl.com/paulsfacebookpage
Using good-format’s format.
Date List Price+- Sold Xpired Inv+- Inv S/L(%) 12.05.31 258 160 64 196 -2 18881 25 12.06.01 288 130 147 447 -306 18575 51 12.06.04 340 219 87 145 108 18683 26 12.06.05 309 173 86 82 141 18824 28 12.06.06 281 163 82 102 97 18921 29 Total-Cur 1218 685 402 776 40 June-Avg 305 171 101 194 10 33 List Price+- Sold Xpired Inv+- Inv S/L(%)Like or Dislike:
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June 6th, 2012 at 9:42 pm 121
Another brutal day for the bulls. I must say this isn’t quite as much fun as it used to be. Now its just a given that the market will crash its not even a question.
Good luck all Bulls or buyers in the last 2 years.
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June 6th, 2012 at 9:44 pm 122
@McLovin: Are you kidding me? This is way more fun
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June 6th, 2012 at 9:46 pm 123
@curious lurker: Congrats lurker. It warms my heart when people follow their dreams and leave town. You’re headed to a better place.
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June 6th, 2012 at 9:53 pm 124
#124 – True but it used to be that I would wonder what the daily’s would be.
Now 30% S/L’s in primetime are the norm.
The excitement has gone.
This market is one its way to many many years of downward movements. Think Whistler or Florida. The average person has no idea what is in store. This in a perfect market for RE. Imagine an external shock or higher rates?
Vancouver top to bottom – 7 years and 45%.
19K party soon!
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June 6th, 2012 at 10:08 pm 125
@YLTNboomerang: Economists, even doomers, are as bad a real estate agents. They all talk out of both sides of their mouths. Rosie said that Flaherty had prevented a bubble when he pulled back on CHMC-insured amortizations, what was it, 18 months ago? Now he says that the bubble that he previously said was no longer there has now burst? Aaaaarrrrrgghghghghgh! I’m soon going to go with James Althucher and stop watching/reading the news, period. It’s all useless and just trying to either scare you or entertain you. Completely useless for news or commentary.
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June 6th, 2012 at 10:09 pm 126
THANX PAUL B.
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June 6th, 2012 at 10:19 pm 127
@McLovin: I agree. I’m not having fun either. Mainly because I can no longer bear to go to open houses and torture real estate agents. Hopefully my taste for blood will come back in the fall.
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June 6th, 2012 at 10:19 pm 128
It’s funny how people think sometimes…
Stuck in place: Canada’s mobility problem
So if I follow the logic, it’s better to be a homeowner and unemployed than a employed renter.
This guy just doesn’t realize that he’s already in a position of weakness that that he’ll get himself into trouble with that kind of attitude…
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June 6th, 2012 at 10:45 pm 129
@Makaya:
No different than people who drive 4hrs each way from Seattle to Portland to save 8% on sales tax.
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June 6th, 2012 at 10:48 pm 130
@patriotz:
Sewer Sommerville is hardly a neutral voice.
He works for UBC who runs the Sauder School of Real Estate.
He needs to pump RE in order to get students through their licensing program.
Not hard to add 2 and 2 together.
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June 6th, 2012 at 11:11 pm 131
Vancouver West – Detached – Total Dollar Volume:
Pretty sharp drop vs May 2011, even below May 2010 levels.
http://www.scribd.com/doc/96082302/Rebgv-Area-Charts-2012-05-Vancouverwest-Graphs-listed-Sold-Dollarvolume
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June 6th, 2012 at 11:14 pm 132
@Navin R. Johnson: I didn’t expect it to be a whole lotta fun, but it sure is interesting.
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June 6th, 2012 at 11:43 pm 133
Yatter is showing 144 sales. Just saying.
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June 7th, 2012 at 5:26 am 134
Seems that REBGV is posting some sales late in the evening now so the PaulB numbers are not showing all the transactions. For June 5 there were 141 sales and June 5 there were 157 sales. Quite a difference from what was there when PaulB posted.
We are not quite on the trend to come below 2008 unless the sales start to slow a lot. Where we are seeing a large volume increase is in East Van attached. Otherwise, most other areas are lower than 2008 however including right now Van-West condos.
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June 7th, 2012 at 6:42 am 135
@ZRH2YVR: Agents are having to work longer hours to get the deal done?
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June 7th, 2012 at 4:21 pm 136
@pricedoutfornow:
I am in exactly same situation as you are. With small difference – I had to move just recently.
Regarding your question, I am asking same thing myself as well. I know the options very well (as you are I am sure). Sooo… the answer… is:
WAIT OR BUY OR LEAVE VANCOUVER OR RENT another place.
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June 8th, 2012 at 3:05 pm 137
@CuriousLurker – If you blog about your experiences moving stateside, I know I’d be interested. My family is in the exact same position as you, except husband hasnt formally started applying for jobs there yet (software engineer). The only thing that keeps us here is family really. I would love to know how education and health care measure up from someone actually making the switch. I think too often we dismiss the US as a non-option because of the assumption that schooling is terrible and health care is too expensive. I’m betting with better salaries, cheaper cost of living, and affordable housing that maybe healthcare costs and even private school costs would balance out and maybe we’d still come out ahead. I don’t know. I’m just sick of it here, the rain, and the attitude that somehow its different here. Let us know if you start a blog.
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June 10th, 2012 at 6:59 pm 138
This articles is one of the most interesting to read for me, the concept of this articles is really good and helpful to all blogger specially for me.
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June 12th, 2012 at 5:23 pm 139
[...] so glad to leave and return home. Vancouver is nice, but it sure ain’t worth the cost.” – Escapee at VCI 6 Jun 2012 9:20pm Share: This entry was posted in 07. Avoiding Vancouver, 14. Social Effects of the Boom, 15. [...]
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