The ‘right price’ keeps changing

Yesterday we heard from a Vancouver Realtor about why condos aren’t selling.

They’re overpriced.

And now there’s this article in the Vancouver Sun Buyers on the Sidelines as Market Slows.

Its all about the market slowdown – we’re now seeing the lowest number of sales since 2000 in Vancouver.

Nice houses that are priced right are selling within days, some in bidding wars. But anything priced too high or considered undesirable is apt to sit idle in this market, which is, according to the Real Estate Board of Greater Vancouver, witnessing the lowest total sales for the region since July, 2000. The Board reported 2,098 property sales in July, a drop of 11.2 per cent compared to June. It’s a drop of 18.4 per cent compared to July, 2011.

There are many anecdotal stories around the Lower Mainland about houses that have sat on the market for months, priced too high for the more price-conscious market. A six-year-old West Vancouver home on a 21,000-square-foot lot overlooking Capilano Golf & Country Club was originally listed at $3.695-million three months ago. The owners have reduced the price by $400,000 and it still hasn’t sold.

“There is a lot of product but it’s not selling for the price that people expected or hoped for,” says real estate finance expert Tsur Somerville, who is director of the University of B.C.’s Centre for Urban Economics and Real Estate. “People aren’t buying at the prices that are being set.”

Well here’s a funny thing about ‘the right price’ in a correcting market: it keeps changing.

I live in a BC market that is several years into it’s correction and I can tell you that the places that are selling are moving only at prices that are lower than the ‘right price’ a year ago and far lower than the ‘right price’ several years ago.

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HFHC
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HFHC

New Listings 190
Back On Market Listings 9
Price Changes 128
Sold Listings 76

AS OF 2:46PM

ALL LOWERMAINLAND

patriotz
Member

@JR:
“either Krugman or Steve Keen had a post recently about interest rate increases and used Japan as an example.”

Not a very useful example since Japan was the world’s biggest creditor and had a high savings rate and high personal savings when their bubble burst.

Realtor says
Guest
Realtor says

Apparently prices are rising, people are just buying cheaper properties. It all makes sense now!

Bally
Guest
Bally

@Makaya:
“Using this metric, home prices fell a modest 0.74 per cent between June and July”

That’s a considerably less modest 9% on an annualized basis i.e. full scale crash.

JR
Guest
JR

I’ll have to go find the link but it was either Krugman or Steve Keen had a post recently about interest rate increases and used Japan as an example. Basically when rates get this low it takes a very long time for them to go up.

jesse
Member

@Vote Down The Facts: “My prediction on the future direction of interest rates is based on the US Feds saying they’ll keep rates low until late 2014”

Yet another wonderful superb cash-generation activity right there if you’re right.

Someone told me once that long rates encompass all future expectations of short rates, or something to that effect. So moving rates higher in (at earliest) 2014 is — hang on… (tap tap tap) — 2 years away. That means the 5 year bond has — (tap tap tap) — 3 years to maturity after 2014. So let’s say overnight rates might be thought to be increasing post-2014. Maybe the mouth-breathers trading the longs are thinking that’s more likely now than before.

Or maybe they finally read (and I mean r-e-a-d) zerohedge and see hyperinflation in our future.

gokou3
Guest
gokou3

@Vote Down The Facts: And why did 5yr bond rate goes from 1.07 to 1.502% in two months, per a previous poster, when US Fed has not changed rates for the past 3 years?

jesse
Member

@Vote Down The Facts: “It was a reference to those who think a mortgage interest rate hike is coming every time bond yields tick up slightly.”

I read more silence when rates drop but let’s chalk it up to wilful blindness. Still, if rates are going to have gone up, they’ll have to go up first. Or put another way, going from a low rate environment to a high rate environment involves rates going from low to high. 🙂

gokou3
Guest
gokou3

@Vote Down The Facts: So why isn’t US real estate prices sky high again?

patriotz
Member

@Vote Down The Facts:
Take your eye off the rates and look at availability. The total amount of government mortgage guarantees cannot continue to increase indefinitely. That’s what the recent CMHC changes were all about and you will see further tightening of qualifications if the growth in debt does not taper off. That’s what’s going to bring this bubble to an end.

Low rates don’t help you buy if you can’t qualify to borrow.

Bag it and tag it
Guest
Bag it and tag it

@VMD: Good points. One option might be to do a random sample of properties each month and compare sale value to assessment value. It would be interesting to see the month by month change in the sample avg. We could even go back 6 months and take a random sample and compare to this month so see how far we’ve come in those 6 months….

Vote Down The Facts
Guest
Vote Down The Facts

@gokou3: “If you can predict the future direction of interest rate based on examination of an interest rate vs time graph, then you would be too rich to think about the fluctuations in vancouver RE”

Fixed term mortgage rates are derived in part from the bond market.

My prediction on the future direction of interest rates is based on the US Feds saying they’ll keep rates low until late 2014. No magic necessary.

gokou3
Guest
gokou3

@Vote Down The Facts: If you can predict the future direction of interest rate based on examination of an interest rate vs time graph, then you would be too rich to think about the fluctuations in vancouver RE.

Chabar
Guest
Chabar

@Madashell: @legacy:

It is normal in some cultures.

Chabar
Guest
Chabar

@Anonymous:

Austria (Wienna) do not let them in so easy if at all. What they are going to do with them in the heart of Europe anyway?

Vote Down The Facts
Guest
Vote Down The Facts

@jesse: “don’t know of much that indicates an “imminent increase in interest rates” of the 5 year bond. If you know of such a beast, you will be able to afford a westside mansion in very short order. Thanks for the wonderful insight.”

It was a reference to those who think a mortgage interest rate hike is coming every time bond yields tick up slightly.

bcj
Guest
bcj

@jesse

Not to put words in anyone’s mouth but probably what he means is that this series is super volatile and bounces around like crazy for no apparent reason. What seems like a significant move, +40 bps in 3 weeks, seems more significant than it is, only because rates are so absurdly low.

Unless we see yields move higher from here I expect we’ll continue to see deeply discounted 5 yr rates at 3% as the typical spread is about 150 bps.

jesse
Member

@Vote Down The Facts: “It’s still super low by historical standards, and doesn’t indicate any imminent increase in interest rates.”

I don’t know of much that indicates an “imminent increase in interest rates” of the 5 year bond. If you know of such a beast, you will be able to afford a westside mansion in very short order. Thanks for the wonderful insight.

Madashell
Guest
Madashell

@Vote Down The Facts: Just more nails for the coffin for the Vancouver Real Estate.

Vote Down The Facts
Guest
Vote Down The Facts

@oneangryslav2:

“That’s only 50 basis points; ’tis but a flesh wound! What, you mean that’s equivalent to a 40% increase in just a couple of months?!? Gulp!!”

It’s still super low by historical standards, and doesn’t indicate any imminent increase in interest rates.

legacy
Guest
legacy

@jesse: I find it so strange that the same people that think it’s important to drive an overpriced vehicle aren’t embarrassed to be seen fighting over a grocery sale or buying cartloads of expired dented tins of food.

s.park
Guest
s.park

drove back from the airport along granville street…there musta been 30 to 40 for sale signs from 16th to about 70th. some of the signs looked like they had been there a while.

if i was from out of town and was being driven downtown i might think, ‘why is everyone fleeing?’.

oneangryslav2
Guest
oneangryslav2

@Madashell:

Just notice the 5y bond rate went up to 1.502 from the low of 1.07 in June.

That’s only 50 basis points; ’tis but a flesh wound! What, you mean that’s equivalent to a 40% increase in just a couple of months?!? Gulp!!

jesse
Member

@Vote Down The Facts: “I believe they expressly prohibit what you’re proposing.”

Yes, actually even publicly referencing MLS price info without prior consent can get you a letter from an MLS lawyer. If you think that’s unfair let your MP know.

BC Assessment makes some of its money by charging fees for access to the data it has, as does the LTO. If you don’t like it let your MLA know.

real_professional
Member

http://online.wsj.com/article/BT-CO-20120815-706584.html

“Average existing home prices in Canada declined 2% on a year-over-year basis in July, but the loss was concentrated largely in Vancouver, where prices fell 12.2%, according to the Canadian Real Estate Association.”