August 2012 Vancouver Market Outlook
B5Baxter posted this in the comment section yesterday, but the number of links tripped the spam filter and it was held up in moderation for a while.
We appreciate all market analysis and thought this one deserved it’s own post.
Here’s his summary of where we are in the Vancouver real estate market and roundup of forecasts:
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I have started to put together a monthly housing analysis update that I share with interested people. Here is the most recent one:
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Vancouver Real Estate Market Analysis – August 2012
July saw the lowest Metro Vancouver real estate sales in over a decade. Sales were lower than 2008 when prices saw a significant drop. And inventory has stayed near or above 2008 levels since the beginning of the year. That means that over the next few months we should see a drop in prices at least as great as we saw in 2008.
In 2009 prices recovered after interest rates were lowered and other government policies were introduced to stimulate the market. This time around there is less room to move interest rates and the federal government is signaling that they are interested in cooling the market rather than stimulating it.
The low sales and high inventory would indicate that we may be at the beginning of the long anticipated collapse of the Vancouver housing bubble.
Based on an analysis of price/rent, price/income and price/ gdp growth I am estimating that the current market is overvalued by 40-60% and we should expect to see declines of that magnitude sometime in this decade.
Average prices for detached homes in Vancouver have declined by 15% (www.yattermatters.com) from a peak in February. This is the first time we have seen five months of straight declines since 1996. Some individual asking prices have declined 20-40% (see: vancouverpricedrop.wordpress.com )
The Teranet index for Vancouver (usually considered a more reliable indicator than average prices of the overall market) has not shown the same decline. It has remained relatively flat but tends to lag other indicators. The REBGV index showed a 1.4% drop since May. This would be consistent with price behavior and inventory levels in 2008 when prices started declining in the second half of the year.
This graph ( http://vancouverpeak.com/groups/data-hounds/forum/topic/crash-curve-graphs/#post-2531 ) shows three of those metrics imposed on a graph of San Diego housing prices. I believe the Vancouver market is similar to the San Diego bubble market and the declines may follow a similar pattern.
If Vancouver prices did follow a similar trend to US prices we would see the 40-60% drop occur in 3-7 years.
Other estimates:
http://worldhousingbubble.blogspot.ca has estimated a decline of 41% and a time to bottom of 97 months (8 years).
The Economist magazine recently ( http://www.economist.com/node/21557731 ) stated that Canadian real estate is overvalued by 75% (this is an average for Canada, some markets like Vancouver may be higher).
http://alphahunt.ca has estimated a decline of “about 50%” from a March 2011 peak with a time-line of “5+” years
http://vreaa.wordpress.com/ has projected a decline of 50-66%
Pacific Partners estimates a 40% decline (http://pacificapartners.ca/blog/2012/07/18/canadian-real-estate-bubble-chart-book/#Table2 )
Investment Comparison:
During the last six months Vancouver Real Estate showed annualized return of 1.6% (using the optimistic HPI). During the first two quarters of this year the non-cash portion of my own strategic allocation portfolio returned 5.2%.
August 9th, 2012 at 12:23 am 1
This crash has been a long, long time coming. The patience displayed by bears will be compensated with a crash unseen anywhere else in the world. Five years from now, Vancouver will be a city approaching bankruptcy and house prices will be lucky to have only crashed 50%. Once this thing heats up, there will be nothing to cool it down. No intervention from the government or the city. Just like a tumbling stock, we will see the layers slowly peel away. As prices crash, people who purchased years ago (2005/2006) and are watching their equity vanish will panic and list their places, hoping to salvage any equity they can in their properties.
The burst will be fast and furious and stats will always be lagging behind by a month or so. There will be no “bounce” in the market for a long time, no spring-time boost. There’s going to be a lot of hard lessons learned here, and unfortunately those who suffer the most will be the most naive. The “well meaning” middle class young couples who simply wanted their starter home and got sucked up into the nonsense spewed by greedy networks like HGTV, giving in to the lust for granite and stainless. What a shame.
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August 9th, 2012 at 12:47 am 2
70-85%… still stand by it.
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August 9th, 2012 at 2:50 am 3
Ozzie said July 2012 is already 20% down from May 2011
http://www2.jurock.com/hotproperty/tips.asp
“The real estate market is down 12% on the average price – July over July … but a whopping 20% in price over May 2011!!!
July 2012 – $669,000
July 2011 – $762,000 – 12%
July 12 – $669,000
May 2011 – $834,000 – 20% !!
Volume is down too. Listings are higher.
Ozzie says: the market is down in sales by 25% … So what … You have to get your property into the 75% that sell.”
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August 9th, 2012 at 5:16 am 4
@G:
With only 49 sales a day and 11,000 realtors fighting over it, looks like even Ozzie is getting desperate. How will be afford his mercedez benz and big old swimming pool without commission.
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August 9th, 2012 at 5:19 am 5
“Five years from now, Vancouver will be a city approaching bankruptcy”
Nope, property tax revenues don’t depend on assessments and municipal expenditures are non-cyclical (e.g. no EI or welfare spending). They will lose revenue from development permits due to a slowdown in construction, but they’ve been through that before. The city kept its AAA rating through the 80′s, and anyone who was around then can remember how bad things were.
Remember BC municipalities cannot run an operating deficit and the councils MUST levy taxes to meet expenses. If that means higher property taxes, tough.
The rest is pretty much on the mark IMHO.
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August 9th, 2012 at 5:23 am 6
@ScubaSteve:
Whoops. I always get Bob Rennie and Ozzie Jurock mixed up. Sorry, how will Bob Rennie afford his swimming pool and mercedez benz without commission. Ozzie Jurock will be fine… he pumped the market up on the way up with his seminars and will pump it on the way down too. Probably sell more tickets to his conference this year as he switches to bear mode. “How to survive in this market”.
By the way, how’s Bob Rennie’s olympic condo pitch going?
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August 9th, 2012 at 5:30 am 7
1 ScubaSteve Says: “…a crash unseen anywhere else in the world.”
Vancouver possibly but not Canada. It will be hard to outperform Ireland’s collapse. We might have to settle for Bronze.
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August 9th, 2012 at 5:32 am 8
@patriotz: @patriotz:
Patriotz,
Doesn’t matter if property taxes don’t depend on property prices dropping. If prices collapse 70 or 80%, who is going to be able to afford those property taxes when they cost as much as a monthly mortgage? Every homeowner in Vancouver is now a “shareholder” in the post-olympics city of Vancouver. Good luck selling a home for $400k that has property taxes of $6000 a year. That is why we saw $1 houses in Detroit… because the property taxes owing were more than the actual value of the land.
As for Vancouver’s AAA rating, I’ll bet you that it is gone by the end of 2014. It’s a done deal. Once that happens, Vancouver’s debt load suddenly gets a little more scary. A city must be self sustaining and if we revert to the mean real estate prices or anywhere close to it, then property taxes will have exceeded the growth rate of property prices by a significant margin. That is not sustainable forever. E.g., if property taxes go up 5% every year forever, but house prices only go up 4% per year forever, then eventually, at some point in the future, property taxes will exceed the actual house price.
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August 9th, 2012 at 6:38 am 9
8 ScubaSteve Says: “If prices collapse 70 or 80%, who is going to be able to afford those property taxes when they cost as much as a monthly mortgage?”
Unless they lose their jobs, in which case they probably couldn’t afford the mortgage either, why would a property collapse lessen the ability to pay the taxes they do now?
You’re also greatly simplifying the situation in Detroit, the median house price in the core hit $7000. It doesn’t take many years of back taxes to push a home value negative. In your Vancouver example it would take over 60 years to create a similar situation.
http://www.businessweek.com/the_thread/hotproperty/archives/2009/03/the_median_home.html
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August 9th, 2012 at 6:39 am 10
Vancouver Sun article says RE prices will increase next year:
““A recent tumble in home sales coupled with a drop in headline prices have some wondering (hoping?), whether Canada’s longtime poster child for a potential housing price bubble is set to burst,” the report concluded. “While a weakening state of demand in Metro Vancouver makes short-term price drops a near certainty, we expect that declines will be both modest and temporary.
“Prospective sellers are expected to respond to weaker market conditions by curtailing listings activity, which will limit excessive inventory in the housing market. Short of another recession and large-scale job losses, market activity in the Lower Mainland is expected to be characterized by a relatively low sales and a flat-to-weak pricing environment.”
According to Central 1, B.C. as a whole should also see prices decline this year before rising slightly in 2013 and 2014.”
http://www.vancouversun.com/business/real-estate/Metro+home+prices+will+slip+plunge+Central+Credit/7060886/story.html
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August 9th, 2012 at 6:44 am 11
Average overlaid with Case Shiller. Great work.
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August 9th, 2012 at 7:37 am 12
@ScubaSteve:
“E.g., if property taxes go up 5% every year forever, but house prices only go up 4% per year forever, then eventually, at some point in the future, property taxes will exceed the actual house price”
Just for fun I’d thought I’d figure out how long. Current rate in CoV is 4.05077 mills (all levels). That is, a million dollar house pays $4050.77/year.
For the annual property tax payment to equal the house price at the rates of increase you have given, it would take about 650 years.
Another thing to keep in mind, it doesn’t matter to the city whether the current owner is able to pay the property taxes. Just whether someone is willing to buy the house and pay the taxes. People buy houses and pay taxes in Canadian and US cities where prices are 20% of those in Vancouver and taxes (I mean the amount paid, not the rates) are just as high.
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August 9th, 2012 at 7:38 am 13
@Village Whisperer: I will add your estimate to the list next time I do this.
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August 9th, 2012 at 7:44 am 14
Canada’s trade gap widens, imports hit record
Gee, it looks like the miracle economy that Steve and Jim keep bragging about is actually being supported by borrowing money rather than producing things. What’s the likely outcome?
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August 9th, 2012 at 8:12 am 15
#1 @ScubaSteve: “As prices crash, people who purchased years ago (2005/2006) and are watching their equity vanish will panic and list their places, hoping to salvage any equity they can in their properties.”
If we see 2005 prices again, someone who bought in 2005 will be financially ok because they’ve been living in the house. They might feel uncomfortable as price drops eat away their “buffer”, but that’s life. If prices drop far enough it won’t make sense to sell. Of course, there’s usually somebody who needs to sell.
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August 9th, 2012 at 8:34 am 16
@patriotz: “Remember BC municipalities cannot run an operating deficit and the councils MUST levy taxes to meet expenses. If that means higher property taxes, tough.”
Yup and any significant increases of property taxes impacts the property values. Just another reason home prices will go down – higher property taxes across BC.
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August 9th, 2012 at 8:37 am 17
@ScubaSteve: “Sorry, how will Bob Rennie afford his swimming pool and mercedez benz without commission.”
Rennie is so stinking rich already he doesn’t have to worry. Plus new construction will continue and Rennie will get his cut of it. It is the real estate agents that will get hurt and have to find a new career.
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August 9th, 2012 at 8:38 am 18
I drove through Bellingham yesterday after a trip down to Seattle for a meeting. Half the cars there were BC plates. I went into Costco at 11am and the parking lot was completely full, 3/4 of the cars BC plates. The line at the crossing going into the US had to be an hour long.
Gas down there is about $0.75/L right now. What is the cheapest you’ve seen up here. It’s $1.25 at Costco in Abbotsford.
People aren’t going down there just because it’s cheaper or for holiday. They are going because their survival depends on it.
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August 9th, 2012 at 9:22 am 19
@ JR
I can assure you that gas does not cost 75 cents per litre in Bellingham.
Current cheapest in Bellingham $3.65 USD per gallon
http://www.washingtongasprices.com/Bellingham/index.aspx
Assume dollar at par, $3.65 / 3.785 litres per gallon = 96.4 cents per litre.
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August 9th, 2012 at 9:31 am 20
@bcj: Yeah I guess my math is off a bit
I though it was 3.85L/G. So I rounded a bit. Minor details. Still, what is the cheapest gas in Van proper?
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August 9th, 2012 at 9:39 am 21
@JR: “They are going because their survival depends on it”
You mean “supporting their current standards of living depends on it. Survival is, with deference, hyperbole.
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August 9th, 2012 at 10:01 am 22
@JR: “People aren’t going down there just because it’s cheaper or for holiday. They are going because their survival depends on it.”
You were at Bellingham Costco. Does your survival depend on it? If not, why can’t that be the case for the others who were there too?
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August 9th, 2012 at 10:12 am 23
@JR: How much fuel are they burning up driving down and waiting in line at the border? Pennywise and pound-foolish.
These people aren’t filling up their vehicles and buying big blocks of cheese for survival, they think they’re getting a good deal but they don’t count their time or fuel burned. Unless they aren’t declaring purchases at the border to save on tax they aren’t saving much more than shopping online.
I suspect that Bellingham will get hit by a downturn in the lower mainland especially if the US dollar rises.
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August 9th, 2012 at 10:15 am 24
We bought gas Tuesday at Fred Meyer in Bellingham (as we often do on our grocery runs) @ $3.65/gal minus our $.10/gal Fred Meyer card discount = $3.55/gal. A couple weeks back it was $3.45/gal. This works out to approx $.95/litre, $.40 per litre less than current south Surrey prices.
JR: Survival *may* be too strong a word, but when the Peace Arch lineup going south on a *Tuesday* morning (directly after a long weekend) extends past the oh-so-pink Pacifc Inn on Hwy 99, there’s clearly a very real need for the grocery/gas/clothing affordability of Washington State. I live a couple blocks from the border, and the lineups now are far, far longer and far more constant than they were even a year ago.
Can’t say that I can think of *anything* that’s less expensive up here than down there. It’s really quite sickening. Housing, food, alcohol, fuel, clothing, tech gear, cars, taxes, etc, etc. How some people, particularly those who don’t make a ton and have bought a house near the peak, manage to get by is beyond me.
Of course, we have our vaunted health care system, which is usually given as the excuse for the higher prices of virtually everything (outside of housing). The same health care system that forced me to wait FOUR hours just to *see* an emergency room doctor when I recently injured my shoulder. Four hours, in total and complete agony. And even then I had to beg for a much needed X-ray.
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August 9th, 2012 at 10:16 am 25
@Vote Down The Facts:@jesse: I think that is a better descriptor. However, most people are buying food there, not TVs. I don’t fault people for wanting to save money, but there was an article in one of the major news sites saying that the country is losing BILLIONS of dollars to cross border shopping.
Anyways I only bring this up because I’ve seen an increase of BC plates when I go through there, and the dollar has been at par for quite a while. Either the word got out that they don’t enforce food purchases for day trips or people are having to find more innovative ways to save money.
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August 9th, 2012 at 10:19 am 26
@Vote Down The Facts: I see your point, the difference is I went down there for business, and stopped on my way back. I’d be foolish not to pick up items that are 30-50% cheaper down there.
Trader Joe’s FTW.
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August 9th, 2012 at 10:22 am 27
#23 ffej: Believe me, if you live close enough to the border, your time (it’s a short 20-minute drive) and the fuel cost of the trip (as I say, it’s a short 20-minute drive) is nothing compared to the savings. And we always declare everything at the border. Gas in the tank is free, and we’ve never been nailed for our grocery purchases.
And yes, Nexus cards are really nice.
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August 9th, 2012 at 10:24 am 28
@JR:
“the country is losing BILLIONS of dollars to cross border shopping.”
The country isn’t losing anything to cross border shopping – provided the shoppers are paying the required Canadian taxes on entry – any more than it’s losing anything to importing bananas. It’s comparative advantage.
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August 9th, 2012 at 10:25 am 29
* Housing starts slow more sharply than expected in July
* New home prices up for 15th month in a row in June
* Analysts see further market cooling late in 2012
By Andrea Hopkins
TORONTO, Aug 9 (Reuters) – Canada’s hot housing market showed signs of cooling on Thursday as July housing starts slowed more sharply than expected, but housing prices were still climbing in June and analysts said a real slowdown may not come until late in 2012.
It was the first time in seven months that the rate of starts fell below the six-month trend, and a government decision to tighten mortgage lending from July was expected to contribute to further slowing as 2012 draws to a close.
http://in.reuters.com/article/2012/08/09/canada-economy-housing-idINL2E8J933F20120809
At the end of article mentions that prices still rose, to me this is a red flag on a big bubble bursting soon.
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August 9th, 2012 at 10:30 am 30
This from Mark Carney: ‘ so that Canadian business and Canadians can get on with their lives and focus on how we’re going to grow our economy, which is largely going to be investing in productive capital, not in houses or condos,’
I think Mark must be reading this board, because Patriotz has been saying that for a very long time….housing is not something to build your entire economy on….hopefully it’s not to late to right this ship.
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August 9th, 2012 at 10:35 am 31
@JR: “the country is losing BILLIONS of dollars to cross border shopping”
That has been the case for as long as I can remember.
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August 9th, 2012 at 10:44 am 32
@patriotz: Umm WHAT? Lower mainland businesses ARE losing business to cross border shopper. So is the government on revenues. How can you say that? It might be .001% of GDP, but that isn’t really the point, it’s what lengths people are willing to go to save money (or perceived savings)… to pay their fat mortgage.
And people aren’t paying duty. You can go down for the day and buy several hundred dollars of groceries and they don’t enforce it at inspection. Each person can go bring back $800 after 48 hours.
Anyways, sorry for the thread creep here, didn’t mean to go on and on and judging by the votes it seems like a polarizing topic.
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August 9th, 2012 at 10:56 am 33
Hello to the Blog. As August starts to look like a month which will be a large decrease still in volumes, we here at GVREB would like some thoughts from the blog.
We at GVREB believe that regulations are required in the Real Estate industry to govern the messages that the profession provides to the public or to buyers (and sellers) which is outside their area of expertise and training. Speicifically, we believe that any financial related comments should be prohibited. Consider the regulations that are placed on the Financial Services Industries such as mutual funds. There are strict items which can not be commented on and messages that can not be given.
Can you imagine if the Mutual Fund industry sold you on products saying “This has been the best investment for the past 10 years and you so have to get this to become rich!!”.
We believe that Real Estate Professionals should remain within their expertise and should not be providing any financial related comments.
Steps should be taken to lobby the government to implement these changes because we can not see the industry itself self-regulating and implementing their own restrictions.
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August 9th, 2012 at 10:58 am 34
@JR: “I see your point, the difference is I went down there for business, and stopped on my way back. I’d be foolish not to pick up items that are 30-50% cheaper down there.”
Yup, and maybe everybody else there had a similar reason.
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August 9th, 2012 at 11:04 am 35
@JR: Uhm…I think groceries are exempt anyways? When’s the last time you paid taxes on basic grocery like fruits and veggies? Also, enforcement costs money too. If someone bought $200 worth of clothings on a day trip, the tax/duty on it is probably like $30 max. Chances are it costs the government $15 or maybe even $30 to process that tax/duty, so it’s just not worth it.
Yes it hurts Canadian producers and retail but then again, you can’t blame people for unwilling to pay more than they have to in order to fatten the pockets of others. I work hard for my money and I damn well have a right to spend it in the most economic beneficial way for me. It’s not my patriotic duty to buy your goods and services and make you rich simply because you happen to also be Canadian.
When milk costs like 50% cheaper at Costco, eggs 30%+ cheaper, seafood 15% to 25% cheaper, and chicken on sale at $0.99/lb, it’s totally worth it. Especially for the Indian family who buys like 40 to 60 gallons of milk on 1 trip.
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August 9th, 2012 at 11:07 am 36
@JR: “It might be .001% of GDP, but that isn’t really the point, it’s what lengths people are willing to go to save money (or perceived savings)… to pay their fat mortgage.”
Are you implying that none of the people who shop cross-border are renters?
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August 9th, 2012 at 11:35 am 37
#35 @space889: “When milk costs like 50% cheaper at Costco, eggs 30%+ cheaper, seafood 15% to 25% cheaper, and chicken on sale at $0.99/lb, it’s totally worth it.”
Agreed, if you’re not counting time (i.e. your shopping trip is an activity like watching tv) then you can easily save $50-100 on gas and certain grocery items. Many specialty products are also 30-50% cheaper in the US. We put in orders with my extended family whenever they go, and they do the same when we go. The Canadian economy benefits from this pressure valve, although I can’t say the end result is any different. Everything is too expensive here, and I think it is starting to matter.
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August 9th, 2012 at 11:41 am 38
An update on the Market for August and Price movements over the past 2 weeks. We are definitely seeing a shift in the market downward with measurable decreases in median and averages still occurring. This Week’s SFH average is coming in at the lowest since almost 2009. Today there was also a land-value-only property that sold in Richmond for the same price as 2009. Again – almost every property selling in Richmond is taking 20-30% decreases off their original sky-high asking prices and coming in 10-15% below assessed value.
Note – - – - The Average price of apartments in August however will be higher by approximately 6,000 due to one significant sale in West Vancouver this week for close to $6 Million. Watch for this when the averages come out. Median however has been very clearly down on attached by 6% in the past 5 weeks. It was an immediate decrease – it did not even blend in. It all started in the week ended July 14 – - -.
Sun’s coming out and the other half is coming home from an extended vacation tonight – so looks like I’m offline for a few days.
(See some of you on Aug 20 perhaps . . . . )
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August 9th, 2012 at 11:47 am 39
@ZRH2YVR: ZRH2YVR, my blog post today is about Richmond.
A Richmond realtor is saying “In Richmond, there is a high probability of a price decline for detached homes in excess of 30%… Sellers who need to sell will have to cut their prices more deeply to attract buyers. This could be the beginning of a real estate down cycle. The momentum will pick up when more sellers realize that a real estate downturn is in motion…The cascading effect of declining home prices will snowball, causing more home sellers to sell before home prices drop further… The in-balance (sic) in supply and demand is massive for million dollar homes in Richmond. A price collapse in Richmond detached homes looks inevitable.”
He then reports that there are a total of 722 listings in Richmond right now for homes over $1,000,000. With average sale around 27 homes the past 2 months, there are 27 months supply of homes. For detached homes over $1,500,000, the past 2 month’s sale averaging 11 units against 361 listings. This translates into a staggering 33 months supply of homes.
http://whispersfromtheedgeoftherainforest.blogspot.ca/2012/08/richmond-realtor-warns-price-declines.html
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August 9th, 2012 at 12:08 pm 40
Today’s anecdote and lesson:
Know of a couple purchased 1 one bedroom in Vancouver for $430s.
This was back in 2010 and they were just getting married at the time.
I know the wife and told her I didn’t think it was a good idea since they didn’t even have a downpayment.
They were so worried about “buy now or be priced out forever”, went to his family for a loan for the 20%.
Fast forward to this week. Couple now has a 1yr old and the place is feeling too cramped. On top of that her job situation is changing and she needs to work in Burnaby.
Now they want to sell and buy a bigger place closer to her job.
They will list the unit for $419K to start.
My thoughts, they’ll be lucky to get $400 and minus the transaction costs, will be down tens of thousands.
The lesson here is don’t buy unless you know you’re going to stay there for 5 to 10 years.
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August 9th, 2012 at 12:10 pm 41
@ Village Whisperer
Richmond 1.5M+ is a textbook case of a RE market going illiquid. It’s been a long time coming.
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August 9th, 2012 at 12:22 pm 42
@GVREB:
“Speicifically, we believe that any financial related comments should “be prohibited.”
This reads like a classic troll, but he looks hungry so I’ll feed.
Yes, of course you want to prohibit such financial related comments NOW since you know we are entering a multi-year period of awful financial return in real estate. Where were you as the bubble inflated?
Of course, after all the devastation is over…GVREB will quietly want to start making financial comments and build up the beast again.
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August 9th, 2012 at 12:30 pm 43
@VGuy: You’re making the understandable mistake of confusing GVREB with REBGV. THey aren’t the same thing.
GVREB posts anti-spin market news releases at the end of the month that are very different from the REBGV press releases (although they both use factual market info).
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August 9th, 2012 at 12:40 pm 44
It’s different here right?
In the US you can get a 30 year mortgage with a rate locked in at 3.65%. FOR THE ENTIRE TERM OF THE MORTGAGE. You can’t do that here.
In the US you can write off mortgage interest on your home against your income to save on your tax bill. You can’t do that here.
In the US prices are now down in many places to the point where you can buy for cheaper than renting. You can’t do that here.
Some US state where prices fell the most (Florida, Nevada) are recourse states which means a lender can go after the buyer for more money after a foreclosure.
You CAN do THAT here!
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August 9th, 2012 at 12:57 pm 45
@JR:
Protecting uncompetitive sectors penalises competitive sectors.
Do you think Canada would be better off if the US border were closed to trade altogether?
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August 9th, 2012 at 1:03 pm 46
@JR:
Foodstuffs are exempt from duties (Amazing, I know)… There are some exceptions for products covered by marketing boards in Canada… ie. Chicken, Turkey, Eggs, Milk, Cheese, etc… but usually the guards don’t care if you bring in “contraband” chicken.
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August 9th, 2012 at 1:19 pm 47
@patriotz: Trade or visitors bring back purchases? Big difference.
What is it, 73% of Canadian exports go to the US? I think you have your answer.
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August 9th, 2012 at 1:21 pm 48
@kansai92:
No. The lesson is don’t buy when the costs of owning far exceed the costs of renting, regardless of how long you plan on staying in a place.
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August 9th, 2012 at 2:13 pm 49
@rp1: We tend to go once every 4 to 6 weeks and treat it as a day trip/getaway. So time doesn’t factor as much. Also, if I save $100 net on a shopping trip and it took us an extra 3 hours, that’s a $30/hour for 2 adults saving which would translate into roughly $50/hour pre-tax or $25/hr per person. So it’s a good pretty a good deal in my view. It’s not like there are other methods for me to easily save/earn $25/hr doing something I would normally be doing and have some fun as well. So honestly I don’t really get this only if you don’t count the time argument.
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August 9th, 2012 at 2:21 pm 50
For the first time since 1998 more money leaves China than enters it
MAINLAND China can now boast over 1m wealthy citizens (qianwan fuweng) each with over 10m yuan ($1.6m), says the latest edition of the “Hurun Report”, which keeps track of China’s capitalist high-roaders. But the mainland seems to be having trouble keeping them. According to the report, published on July 31st, more than 16% of China’s rich have already emigrated, or handed in immigration papers for another country, while 44% intend to do so soon. Over 85% are planning to send their children abroad for their education, and one-third own assets overseas.
http://www.economist.com/node/21559949
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August 9th, 2012 at 2:26 pm 51
If everyone thinks prices will drop about 40% isn’t there a good chance prices will rise 80% = opposite.
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August 9th, 2012 at 2:35 pm 52
Carney hellbent on deflating the RE bubble:
”
In a separate interview with CTV on Wednesday, he suggested months of dire warnings that Canadians were piling on too much debt was starting to pay off. The pace of growth in household debt is slowing and the housing market is cooling.
“I think an adjustment is beginning in the Canadian housing market,” Carney told CTV.
Still, policy makers are monitoring the situation closely. “If additional steps are required, including by the bank, we will take them,” he added.
”
http://business.financialpost.com/2012/08/09/rate-hike-still-on-the-table-carney-says/
This is in total contradiction to what the pumpers at the GVREB were spouting ytd in Straight magazine.
Takeaway: Get out of this market, and get out FAST, because you WILL get burned!
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August 9th, 2012 at 2:42 pm 53
I mentioned about a south burnaby townhome listed for sale a couple months ago. It has finally sold. Originally listed for $619k. After THREE $20k list price reductions, it was last listed for $559k. Sold price? $540k. $79k below hoped for the owner. The original list price was slightly over, but not totally out to lunch. The seller was motivated though since he had committed to purchase another place.
Lastly, there’s another unit in the same complex that was taken off the market after being listed 8 days. Listed price wasn’t high to begin with, but perhaps he was hoping for bidding war? And thus, with no bids he decided to take it off?
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August 9th, 2012 at 3:00 pm 54
If everyone thinks prices will drop about 40% isn’t there a good chance prices will rise 80% = opposite.
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August 9th, 2012 at 3:02 pm 55
@Thinker: Only if you think price changes up or down are a 50/50 random chance event. You’d have to ignore local economy, incomes, credit availability and rent/buy ratios for that. That would be pretty dumb, but there are people who think that way.
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August 9th, 2012 at 3:07 pm 56
80% up in next 2 years wouldn’t be a 0% chance, agree?
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August 9th, 2012 at 3:14 pm 57
@Thinker:
It’s like saying “well, global warming is either happening or it isn’t, therefore it’s 50:50 and my opinion is as good as anybody’s” whilst blissfully ignoring the reams of scientific evidence available. Yet some people still try to invoke that argument.
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August 9th, 2012 at 3:17 pm 58
@space889: I feel a lose a little bit of my soul everytime I cross that border and have to deal with the interrogation. I do it as little as possible…but that’s just my opinion. All the power to anybody that thinks it’s worth it.
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August 9th, 2012 at 3:22 pm 59
@GVREB: “We believe that Real Estate Professionals should remain within their expertise ….. ”
What if everybody already has a coffee?
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August 9th, 2012 at 3:24 pm 60
@Thinker: Other things that have a greater than 0% chance of occurring in the next 2 years:
-Alberta becomes a US state
-Sea levels rise 25′, Richmond underwater
-New 10 jail sentence for blog trolling
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August 9th, 2012 at 3:25 pm 61
@Thinker: “80% up in next 2 years wouldn’t be a 0% chance, agree?”
If you’re a frequentist, then your question is ill-posed since the outcome of the next 2 years is not a repeatable trial.
If you’re a Bayesian, then the answer is subjective and depends on your personal beliefs/model of the market’s parameters.
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August 9th, 2012 at 3:26 pm 62
@JR:
“Trade or visitors bring back purchases? Big difference.”
No difference at all. Importing or exporting goods or services is trade no matter who does it.
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August 9th, 2012 at 3:32 pm 63
@Thinker: “If everyone thinks prices will drop about 40% isn’t there a good chance prices will rise 80% = opposite.”
Yes, absolutely! You should buy as soon as a possible and keep us posted on how much you make.
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August 9th, 2012 at 3:36 pm 64
@Thinker:
Alright, dare you to layout a compelling argument for that. Good luck:-)
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August 9th, 2012 at 3:39 pm 65
@Anonymous: From the Economist article: “But the mainland seems to be having trouble keeping them. According to the report, published on July 31st, more than 16% of China’s rich have already emigrated, or handed in immigration papers for another country, while 44% intend to do so soon”
I don’t know a lot about macro but, if it’s true that money is now fleeing China more than it’s coming in, it seems to raise the question why property sales in the “HAM” areas are now so lacking. Further, check out the graph in that article. Strange how BoP peaked in late 2010 and early 2011, right when “HAM” area prices went from ludicrous to plaid.
Yet the article, from what I read, fronts a point of view that capital outflows are a sign the mice are leaving the ship. If they are, they’re cleverly disguised.
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August 9th, 2012 at 3:41 pm 66
@Thinker:
“If everyone thinks prices will drop about 40% isn’t there a good chance prices will rise 80% = opposite.”
If everyone thinks prices will drop, prices will drop, because nobody will buy.
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August 9th, 2012 at 3:50 pm 67
love this blog. great to be able to compare the Toronto and Vancouver condo scene.
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August 9th, 2012 at 3:55 pm 68
@New Toronto Condos: Too cheap to use Google ads?
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August 9th, 2012 at 4:22 pm 69
@oneangryslav2: It’s worse than that, too cheap to even use craigslist! Man, times are tough in real estate!
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August 9th, 2012 at 4:38 pm 70
@Anonymous: This can only mean one thing: a lot of HAM still to come! Brace yourselves for an ongoing RE boom!
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August 9th, 2012 at 5:09 pm 71
You guys noticing how tight the rental market is getting? I think a lot of pent up demand is brewing. 2013 could be the new 2009. Just saying….
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August 9th, 2012 at 5:10 pm 72
@Colin:
What are you talking about?
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August 9th, 2012 at 5:19 pm 73
@Anonymous: Interest rates are pretty low again, a lot of people might buy rather than sit on the sidelines. I’m worried about that.
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August 9th, 2012 at 5:21 pm 74
New Listings 195
Price Changes 119
Sold Listings 120
TI:18816
http://www.paulboenisch.com
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August 9th, 2012 at 5:24 pm 75
@Colin: “Interest rates are pretty low again, a lot of people might buy rather than sit on the sidelines. I’m worried about that.”
“again”? Don’t you mean “still”?
Well, you have no need to worry. It is *decreases* in interest rates that jolt buyers into action, not sustained interest rates at the same low level.
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August 9th, 2012 at 5:27 pm 76
@Colin: Exactly, … a tight rental market plus lots of HAM itching to get out of China, and the market will skyrocket! Better buy right now to cash in on the new boom.
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August 9th, 2012 at 5:28 pm 77
@UnagiDon: Makes sense, renting and owning cost about the same right now but i feel better about renting.
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August 9th, 2012 at 5:31 pm 78
@Anonymous: They say the best time to buy is when no one else is buying but a boom appears unlikely? I think the Chinese thing is finished, they used to say the same thing about the Hong Kong wealthy years ago.
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August 9th, 2012 at 5:32 pm 79
@Anonymous:
China China China we are long for your present to protect us from those idiot bears.
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August 9th, 2012 at 5:33 pm 80
@Colin: Yes, they said the same about the Hong Kong wealthy, … and they were right. Thousands of them now live in Vancouver.
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August 9th, 2012 at 5:34 pm 81
@paulb:
Thanks Paul!
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August 9th, 2012 at 5:37 pm 82
Sales up this month? Lookin more like 2400 instead of 1400… hehe
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August 9th, 2012 at 5:37 pm 83
@Anonymous: It ended after 2000, same with the Chinese, there’s not an endless supply.
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August 9th, 2012 at 5:39 pm 84
With 3% mortgage rates owning is dirt cheap right now.
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August 9th, 2012 at 5:44 pm 85
@Colin: Not an endless supply, but according to the article posted at comment #50 we have barely scratched the surface.
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August 9th, 2012 at 5:45 pm 86
@hehe:
“Sales up this month? Lookin more like 2400 instead of 1400… hehe”
Never seen anyone suggest sales averaging 80 per day in August is somehow a good thing. Shows how sad things have gotten – the bulls are so desperate they will settle for a 120 sale day now. News flash: We’ve had 485 sales in 6 days. With 16 days left to go, it puts us on pace for 1778 sales. The August average this decade is over 2700. The pace is likely to drop. More importantly though, prices are down big time in the first 6 days of the month. The average could plunge below $1m this month. If sales do pick up, all it means is sellers are more desperate and prices are coming down. Take your pick.
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August 9th, 2012 at 5:45 pm 87
@Colin: “You guys noticing how tight the rental market is getting?”
Nope. Lots of applicants but rents are very stiff to any upwards movement.
“I think a lot of pent up demand is brewing. 2013 could be the new 2009. “
I don’t think there will be a shortage of dwellings any time soon, based on the data I track.
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August 9th, 2012 at 5:46 pm 88
Strathcona Edge is back on the map, with three red dots where last week there were none. All three, same realtor.
Are three condos not enough for you? You can also buy the whole building, and the (vacant, never occupied) retail space on the ground floor.
Apparently the building was intended as rental housing for seniors when it was completed in 2007. The city permitted the developers to repurpose it as a condo development. (I don’t wish to editorialize, but didn’t the city have a condo glut and a rental shortage back in 2007, too?) It’s been languishing on and off the market since then, with no signs of life apart from some droopy balloons and tired security guards.
The development is backed by a catchy name (“0810075 BC Limited”). We’ll have to wait and see what becomes of it.
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August 9th, 2012 at 5:47 pm 89
What will bring this market down is the people that have to sell and have to take big price cuts, in a very difficult sellers market this will establish a downward trend affecting all other listing’s.
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August 9th, 2012 at 6:00 pm 90
A huge sector of the Chinese is surf’n USA. Lots of sun cheap RE and yummy sush.
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August 9th, 2012 at 6:03 pm 91
“The average could plunge below $1m this month.”
hehe. do you hear yourself? where is this NYC?
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August 9th, 2012 at 6:05 pm 92
@Colin:
I’m moving to a new rental house in two weeks. Our Price to Annual Rent is improving from 33 to 41.
Conventional wisdom says it is better to rent when ( Price / Rent ) > 20.
The rental market did not feel tight to me. We found an excellent deal on a beautiful home and negotiated rent down by 7% from asking. My wife is still very happy to be renting and her family is surprised by how nice a place we can afford as renters.
We’ll be comfortable here until it is cheaper to buy than to rent.
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August 9th, 2012 at 6:08 pm 93
Another big sales day. I told ya’ll dont be expecting a crash now for all the reasons I have spelled out over and over…when will you listen
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August 9th, 2012 at 6:10 pm 94
I wouldn’t call it a big sales day. But for a Thursday it’s something to wake up and take notice of.
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August 9th, 2012 at 6:14 pm 95
@Anonymous: #50
From the Economist article:
“Chinese individuals may take up to $50,000 out of the country each year without special permission. Victor Shih of Northwestern University reckons that the richest 1% of Chinese households own $2 trillion-5 trillion of property and liquid assets. If they took fright, they could overwhelm even China’s vast foreign-exchange reserves.”
So, is the author a racist or is this merely a Fleudian slip?
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August 9th, 2012 at 6:35 pm 96
Copied from PaulB’s number
http://www.laurenandpaul.ca
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August 9th, 2012 at 6:38 pm 97
@good-format
Looks like your August 6th 0′s from the holiday are skewing the data, you should remove this date next time you post, but thanks for posting!
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August 9th, 2012 at 6:51 pm 98
@Colin:
What the heck are you talking about?
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August 9th, 2012 at 7:41 pm 99
@Groundhog:
Actually I don’t see any skewing as numbers that would have normally posted August 6 would have to go somewhere… Looks like they are landing now, tomorrow might be another strong day (but i doubt it)
On another topic, I’ve noticed that the Realtor that sold the house we were renting a suite in early May, has only sold one house since but has about 12 new listings.
I’ve calculated his commission to be something like $30K for that sale… Mind you he has an entourage of about 5 assistants… Once he pays their salaries, and the Realtor companies cut wonder how much is left over
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August 9th, 2012 at 7:48 pm 100
I use da@Groundhog:
I use 7 Calendar’s data. It is more accurate than 5 working days. Realtors works every day. A holiday does not make the sales for a week less.
7-day avg used sales data from Aug 3 to Aug 9 divided by 7.
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August 9th, 2012 at 7:52 pm 101
@Turkey:
I rounded up to 5,000,000 for JUST the 15 unit complex after all the commissions and fees and plugged it into the handy dandy mortgage calculator. 25 years at 5% Monthly payment is $29,080.25
Based on 9 bachelors, and 6 1 bedrooms you’d be lucky to see $15,000 a month net expenses and taxes… VERY LUCKY…
Better yet, based on the sq footage in the ad it limits each apartment to a MAX of 520 sq feet. Though that is not taking into account hallways etc etc. So its really probably only about 400 sq foot per unit. This shortage of square footage makes the statement “Property Type: Multi-Family” laughable at best.
Go ahead and try to put a Family in one of those things!
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August 9th, 2012 at 8:09 pm 102
@XYZ
I see what you’re saying, but data is not shown for weekend days (assumed 0) and so I don’t think should be shown for a holiday that will also have 0 sales reported, even if work is being done.
Average sales per day doing it the current way I suppose would look OK at the end of the month, but it will drastically reduce the average sales per day that you are reporting compared to just using weekdays, so that when sales are reported they will nearly ALWAYS be above or near average. I think reporting an average of 81 sales per day, which is what it would be only using days that sales are reported, is a much better representation and provides us a better # to compare to when sales come in each day.
In the end it doesn’t affect anything and I understand what you’re doing and can understand the #’s perfectly fine, but I think for the occasional observer it would be clearer if they could look at today’s sales of 120 and compare to the average of 81 (from days when sales are reported), as opposed to 54 (which will include atleast 2 days of zero sales out of every 7 days).
Just my opinion, do whatever makes sense to you, I appreciate you tracking and reporting the data for us either way!
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August 9th, 2012 at 8:25 pm 103
@xyz: @Groundhog: Actually credit goes to good-format
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August 9th, 2012 at 8:27 pm 104
Yes, credit to good-format! Too much wine tonight I guess.
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August 9th, 2012 at 9:16 pm 105
@xyz: Yup to everything you said. This development is one of my canaries-in-the-coal-mine. To mix metaphors, it’s the Rob Ford of canaries: morbidly obese, delusional, and in search of a heart attack.
Woe be to anyone who bought one of these units. Luckily, seems like nobody has.
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August 9th, 2012 at 10:07 pm 106
Germane to site but not necessarily topic. http://huff.to/Qi7jLh WHat 150K gets you in a variety of places. Good context.
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August 9th, 2012 at 10:48 pm 107
@TNT #90
“Charlie don’t surf!” Sorry everyone, I just couldn’t resist. As a HAM believer let’s hope that charlie is smart with their money and goes surfin USA where prices are now sensible but a lot depends on what USA and CDN governments want to do as far as investor immigration – from what I’ve read on VCI, rules are tightening in Canada, not sure about the USA but I’m sure they need buyers – want to boost real estate the same way Carney wants to deflate Canada’s. Then again, if a million mainlanders are now worth 1.6 million there may be no stopping them. Funny they used that figure – isnt that the new Canadian requirement 1.6 mil?
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August 9th, 2012 at 11:44 pm 108
[...] be lucky to get $400 and minus the transaction costs, will be down tens of thousands.” – kansai92 at VCI 9 Aug 2012 12:08pm Share: This entry was posted in 08. Overextended Buyers, 11. Regrets about Investing in RE, 14. [...]
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