Condos pulling down Vancouver home prices
Dropping prices on condos are being blamed for pulling down home costs in Vancouver.
..because what could be worse than more affordable housing?
Prices on all housing types are falling with forecast for more price drops, Royal LePage is forecasting a 3% drop overall in 2013 but the largest drops so far are being seen in the condo market, which have fallen 3.6%.
“Buyers are waiting for that big decrease to happen but I think if they’re going to keep waiting for that, chances are they aren’t going to see it,” said Todd Talbot, realtor and host of W Network’s Love It or List It Vancouver.
That’s because industry experts say some sellers aren’t interested in making significant price reductions, and are taking their homes off the market.
“They don’t have to sell,” said Brendon Ogmundson, an economist with the BC Real Estate Association.
“You don’t find a lot of extra listings unless people need to sell quickly because of some financial catastrophe, and that simply isn’t in the cards, so what we’re going to see is normal demand and supply dynamics.”
Now I’m curious – what’s you best guess. Does the BCREA economist really believe that prices are set by people taking their property off the market, or by the properties that are sold?
January 10th, 2013 at 4:19 am 1
If buyers don’t buy who are the people who have to sell going to sell to?
See above, Brendon.
http://piggington.com/fence_sitters_will_be_sorry
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January 10th, 2013 at 4:52 am 2
One-year-old condo building in Calgary with apparently major construction defects:
“Calgary firefighters rescued a family on Wednesday after they became trapped in an elevator that was starting to fill with water.
“It was a very bad moment,” says father Alireza Tabatabaei who was trapped with his wife and two-year-old daughter….
Water from a burst pipe on the eighth floor caused a short circuit in the wiring which cut the electricity and sent water pouring into the elevator below.
Jason Li, who lives on the seventh floor, says he heard a popping sound as he was locking his door and then he noticed water coming down the elevator doors and nearby air vents.
“It was literally like a waterfall,” says Li….
Jason Li says the ceiling on the eighth floor is falling down and the seventh floor is wet as well although his unit has
Alireza Tabatabaei says he is not leaving the incident alone and plans to consult with a lawyer.
He says there have been a number of problems with this building since he moved in six months ago and it was only built last year.”
http://www.cbc.ca/news/canada/calgary/story/2013/01/09/calgary-rescue-family.html
Hot debate. What do you think?
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January 10th, 2013 at 5:06 am 3
Arson suspected in burnt condo under construction in the interior. From CBC:
“RCMP in B.C.’s Columbia Valley are trying to determine what sparked a spectacular fire over the holiday season that gutted five condos under construction.
Arson is suspected in the fire at the half-finished Columbia Eagle condo complex in Fairmont on Dec. 22.
Construction on the luxury five-condo project began about six years ago, but then the vacation housing market collapsed.
The weathered framed buildings sat like skeletons by the highway for years.
“The buildings are unfinished and quite dried out and they just went up like candles,” said fire chief Jim Miller.”
http://www.cbc.ca/news/canada/british-columbia/story/2013/01/07/bc-arson-suspected-condo-fire.html
Hot debate. What do you think?
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January 10th, 2013 at 5:55 am 4
BUYERS always determine the direction of the market. It’s not the other way around as he would have it. Dumb.
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January 10th, 2013 at 7:33 am 5
I think it depends on the months of inventory. An increase in cancelled listing could stabilize prices if the months of inventory was low. However, if the months of inventory, after the reduction of non motivated sellers remains high, then you have a market full of motivated sellers competing to get their home sold before another Vendor can sell their house. That would make prices decline.
Hot debate. What do you think?
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January 10th, 2013 at 8:07 am 6
Macleans article – Great Canadian real estate crash of 2013
http://www2.macleans.ca/2013/01/09/crash-and-burn/
Canada building permits plunge into the basement
http://business.financialpost.com/2013/01/10/canada-building-permits-plunge-into-the-basement/?__lsa=9270-0ec7
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January 10th, 2013 at 8:40 am 7
Ah, Vancouver. It’s a long way from the crow’s nest to the poop deck. Canadian million-dollar home sales booming — except…
Even the silver lining is looking a little brown.
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January 10th, 2013 at 9:02 am 8
Here is the newest inventory graph:
http://vancouverpeak.com/Thread-Inventory-Graphs?pid=188#pid188
Since the beginning of the year the average daily increase was: 79
At this rate we would reach 13,000 in 10 days (Jan-20-13)
At this rate we would reach 21,000 in 98 days (Apr-18-13)
and 25,000 by June 21, 2013
So, far inventory has increased faster in 2013 than in 2012.
Thanks PaulB for the numbers!
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January 10th, 2013 at 9:04 am 9
1 Patriotz
I love that chart with the quotes superimposed on it. Hopefully someone from this site puts something like that together in a couple years for Vancouver.
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January 10th, 2013 at 9:54 am 10
One of the things we learn as skeptics of the great Canadian housing boom is how seemingly unsustainable market dynamics can go on longer than one ever imagines. On the other end, post-bubble, this appears to be true as well. I’m linking in a summary from Mark Hanson (for all intents and purposes, the Ben Rabidoux of the U.S.) which describes the ongoing and fundamental weakness in the US market. You would think that 6 years after the US market peak that there would be a pretty good fundamental case for a rebound. However, if one cares to do homework, as Mark has, it appears that it’s not that simple. Housing looks ready to flatline in the US for another year at least. I think it’s worth reading for anyone who cares to make an early bottom call on Vancouver or Canada.
http://mhanson.com/archives/1147
Hot debate. What do you think?
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January 10th, 2013 at 9:58 am 11
@Many Franks:
It’s been a while since I heard the words “red hot” used to describe Canadian real estate…
“Canada’s conventional housing market is showing signs of a slowdown, but the action at the high end of the market continues to be red hot.”
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January 10th, 2013 at 10:02 am 12
“You would think that 6 years after the US market peak that there would be a pretty good fundamental case for a rebound”
Prices in the US are simply back to historical multiples and incomes, so in fact there is no fundamental case for a rebound.
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January 10th, 2013 at 10:09 am 13
That’s because industry experts say some sellers aren’t interested in making significant price reductions, and are taking their homes off the market.
“They don’t have to sell,” said Brendon Ogmundson, an economist with the BC Real Estate Association.
Well without sellers I guess the ranks of R/E agents that BCREA represents will be dropping like flies.
If there are no homes on the market and no sales then I guess the economics of that situation will render Brendon to be redundant.
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January 10th, 2013 at 10:30 am 14
@Anonymous: What could be more appropriate than “red hot”? Nobody wants to touch it or they’ll get burned. And it sure would explain a rash of spontaneous condo combustion.
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January 10th, 2013 at 11:26 am 15
I am not sure why BCREA send a message to people to not lower their price. What good does it make to their member?
I’m sure they’d rather have an elevated sales number with 15% lower price than the current market stand-off.
Turning tricks is the key to their income.
If anything they should be encouraging people to list at lower price to encourage faster turnaround. There are still some people who are looking to buy even in this kind of market.
I can help with the lingo to soften the blow and massage the ego
right-price : list at 10% off
quick win : 20% off
boil the ocean : trying to sell at assessment
circle back : another right-pricing after a month
rapid cycle : right-pricing every 2 weeks
peel the onion : death by thousands right-pricing
think outside the box : listing at lower price than comps
best of breed : lowest price in the market
opportunity cost : dwindling equity
adding value : giving more at the same price
you are your greatest asset : you are underwater and have nothing left
deleverage : sell and get out
Real Estate 2.0 : declining market
thin end of the wedge : we’re on the verge of a crash
pull the trigger : accept that low bid
30000 feet view : yellow copters are no more
new paradigm : declining market
win-win : I got my commission.
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January 10th, 2013 at 11:47 am 16
@raggedyrenter its not about the comfort of sellers, it’s about not scaring away buyers. You can bet realtors are trying to talk sellers into lowering their listing price so they can get their commission and move on.
But they don’t want the message to scare off potential buyers. Who in their right mind would buy if even the realtors were publicly saying house prices are too high, they will continue to drop. If you wait a year selling price on the average bungalow will likely be $100k lower?
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January 10th, 2013 at 12:13 pm 17
@raggedyrenter and Moldcity
About those used house salespeople that urge sellers to unite and remind them they don’t have to sell.. yes it would make most sense for them to want sales income at whatever price the market wants to bear.
However, I think they are fighting to keep the “Dumb Money” in the market. As soon as it becomes painfully obvious to even the dumbest segment of RE speculators that it will not be a good time to put money into the local RE market for many years, that proportion of buyers will start to dry up.
Not only will the salespeople be taking home a slightly lower commission on sales at lower prices than today, but they know they will be making fewer sales to people like “I buy 3, husband buy 3!”
Hot debate. What do you think?
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January 10th, 2013 at 12:34 pm 18
Here is an update on “The Kimpton” in North Van. This was a featured condo on VCI that had put up a sign with their “$100,000 Price Drop Guarantee”. The new sign states to bring your offer and their are only 5 units left. I don’t remember when this was put up, but it hasn’t changed and 5 units are apparently still for sale.
There was a private sale in the building (V97211) that was originally listed at $739k on Sep 16. The seller dropped his price to $699k and it now shows as sold for $670k. A $69k (9.3%) drop from the original ask. According to the listing info the original purchaser paid the HST. So with that and transaction costs, I’m sure there was a huge loss. Ouch.
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January 10th, 2013 at 12:37 pm 19
RE #17:
“However, I think they are fighting to keep the “Dumb Money” in the market. As soon as it becomes painfully obvious to even the dumbest segment of RE speculators that it will not be a good time to put money into the local RE market for many years, that proportion of buyers will start to dry up. ”
Agree. It may be obvious to many of us reading this blog that the market is falling, but to the masses (read: majority) the market is still stable / mildly positive.
Hot debate. What do you think?
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January 10th, 2013 at 12:39 pm 20
Re #10:
“One of the things we learn as skeptics of the great Canadian housing boom is how seemingly unsustainable market dynamics can go on longer than one ever imagines.”
As economist Keynes said, Markets can remain irrational longer than you can remain solvent. Of course, most of us don’t have the means to short the RE market, so solvency is not a problem.
Hot debate. What do you think?
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January 10th, 2013 at 12:57 pm 21
From comment #107 on garth’s site today:
“While it is still early in the year, sales show a 35% year over year drop in January, and a month over month drop of 49%”
FVREB STATS – as of January 10, 2013
6 of 22 Working Days
JANUARY 2013 Listings 656 Sales 124
DECEMBER 2012 Listings 363 Sales 244
JANUARY 2012 Listings 731 Sales 191
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January 10th, 2013 at 1:04 pm 22
Let’s keep in mind some realtors are also speculators.
They need some time and a few greater fools to unload before the collapse.
Also I am wondering in which ways they have shared interests with developers. The panic mode is not in the interest of realtors for the time being, it seems, but it will come.
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January 10th, 2013 at 1:09 pm 23
Re #21:
I am sure the dark side will spin it as “xx% increase m/m!”
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January 10th, 2013 at 1:35 pm 24
…..its not about the comfort of sellers, it’s about not scaring away buyers. You can bet realtors are trying to talk sellers into lowering their listing price so they can get their commission and move on…..
I think you’re giving them too much credit. The reason they don’t want to admit to lower prices is that they’re all trying to dump their own overleveraged holdings before the Tsunami comes ashore.
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January 10th, 2013 at 1:51 pm 25
Per VHB’s posts the last three years:
01/10/11 Inventory: 9863 Months of Inventory: 6.36
01/09/12 Inventory: 11582 Months of Inventory: 9.07
01/09/13 Inventory: 12466 Months of Inventory: 11.37
Inventory is up 7.6% year-over-year, and months of inventory is up 25.4% year-over-year (since sales have slowed).
2013 is going to be ugly…
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January 10th, 2013 at 2:29 pm 26
But what if you HAVE to move? Or get divorced? Or have overextended yourself buying luxury goods you don’t need and can’t afford and just lost our job? Realtors are now spinning things every which way.
Hot debate. What do you think?
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January 10th, 2013 at 2:29 pm 27
December 2012 Year End Housing Market Update, ft. your REBGV Comedian in Chief Eugene Klein.
My favourite quote: “And began a modest decline in the later half of the year.” Which is totally contradicted by what is shown on the graph!
By the way, Whistler condos took a 10% dive in 2012… not news but still ouch!
Hot debate. What do you think?
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January 10th, 2013 at 2:32 pm 28
[Maclean's on Tiff Macklem: End of household debt binge will leave $50bn gap in the economy]
1/10/2013
“Bank of Canada Deputy Governor Tiff Macklem, the favourite candidate to replace Governor Mark Carney when he takes off for England in the Spring, is speaking right now at Queen’s University in Kingston, Ont.
Below is the integral text of his remarks, and here are a few pointers:
- We can’t count on the housing market and overstretched consumers to keep propelling economic growth.
- Eliminating Canadians’ private net debt alone would leave a $50bn gap in the economy.
- What’s going to help us plug the hole? Our traditional engine of growth, exports, has been underperforming for over a decade.
-Two-thirds of this is because we’re exporting to the wrong markets (too much of the U.S., too little of the emerging economies), but one-third is also because we’ve become less competitive. Even in the U.S. market, we’ve lost market share.”
http://www2.macleans.ca/2013/01/10/tiff-macklem-end-of-household-debt-binge-will-leave-50bn-gap-in-the-economy/
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January 10th, 2013 at 2:48 pm 29
“By the way, Whistler condos took a 10% dive in 2012… not news but still ouch!”
Anybody know the current MOI for Whistler condos -or even better, some sort of average throughout the year?
Hot debate. What do you think?
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January 10th, 2013 at 3:55 pm 30
If they don’t want to spook current buyers, the lie they should have tell would be “yes there was a correction but it is over, outlook is rosy, the sellers expectation has realigned and now is a good chance to pick up property for less than what you would pay 6 months ago and build your equity.”
They need to consistently send this message instead of the mixed message of denial we’ve seen. If I am a seller why would I trust a realtor who ask me to cut list price when her association’s economist recommended otherwise?
@VMD
As much as I like the benefit of high dollar, it’s tough for manufacturing industries when the dollar is at par. I think that long term the loonie will devalue against the greenback. Like it or not, Right-to-work will come to Canada. It makes no sense to continue to operate a manufacturing company here when the wage is $32/h when it is $15/h in Indiana etc.
0.8 Loonie, Right-to-work and you will see export to US increase.
International investors will be pissed when their Vancouver Villa dropped 40% in value, CAD dropped 20%, their comrade deported while their PR application is frozen by Kenney.
That would probably be a uniquely Vancouver spectacle we have not seen in US/Europe property crash. We’ve seen all kinds of sob stories but we haven’t seen a rich immigrant sob story yet.
Hot debate. What do you think?
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January 10th, 2013 at 5:33 pm 31
Brian Says:
January 10th, 2013 at 2:29 pm
“But what if you HAVE to move? Or get divorced? Or have overextended yourself buying luxury goods you don’t need and can’t afford and just lost our job? ………..”
Or had a couple successive crop failures due to an infestation or police raid??
Hot debate. What do you think?
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January 10th, 2013 at 5:57 pm 32
@#19 Goukou3
In that free rag 24 Hours they did a poll yesterday of 3 things which readers think would happen in 2013 including whether real estate values would drop – only 50% of responders agreed. Very unscientific poll I’m sure but shocking if 50% of locals are still drunk on the kool-aid..
Hot debate. What do you think?
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January 10th, 2013 at 6:17 pm 33
“Buyers are waiting for that big decrease to happen but I think if they’re going to keep waiting for that, chances are they aren’t going to see it,” said Todd Talbot, realtor and host of W Network’s Love It or List It Vancouver. That’s because industry experts say some sellers aren’t interested in making significant price reductions, and are taking their homes off the market.
“Some sellers”, how about the rest that DO list….don’t they determine the market?
“They don’t have to sell,” said Brendon Ogmundson, an economist with the BC Real Estate Association.
That would include everyone in Vancouver who doesn’t have their place listed.
“You don’t find a lot of extra listings unless people need to sell quickly because of some financial catastrophe, and that simply isn’t in the cards, so what we’re going to see is normal demand and supply dynamics.”
We’ll see about that.
Hot debate. What do you think?
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January 10th, 2013 at 6:35 pm 34
Well, apparently we don’t have to worry about a “hard crash” any more…
Canada’s housing market: Expect soft landing, not hard crash
http://ca.finance.yahoo.com/blogs/insight/canada-housing-market-expect-soft-landing-not-hard-163039553.html
The article is hard to fault, as it cites a number of unbiased, objective sources:
CMHC
CIBC
BMO
Royal Lepage
TD
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January 10th, 2013 at 6:35 pm 35
Too early to draw conclusions, but this year is shaping up to be very interesting:
- inventory is rising faster than the record-setting pace of Jan ’12
- MOI is now 11.4 vs. 9.1 in Jan ’12
- Crash curve graph shows Van is falling faster than any US city (http://vancouverpricedrop.files.wordpress.com/2013/01/graph.jpg)
hat tip b5baxter, PCinWA, observer
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January 10th, 2013 at 6:36 pm 36
WASHINGTON — Federal regulators for the first time are laying out rules aimed at ensuring that mortgage borrowers can afford to repay the loans they take out.
The rules being unveiled Thursday by the Consumer Financial Protection Bureau impose a range of obligations and restrictions on lenders, including bans on the risky “interest-only” and “no documentation” loans that helped inflate the housing bubble.
Lenders will be required to verify and inspect borrowers’ financial records. The rules discourage them from saddling borrowers with total debt payments totaling more than 43 percent of the person’s annual income. That includes existing debts like credit cards and student loans.
New federal rules aim to curb risky mortgages
Hot debate. What do you think?
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January 10th, 2013 at 6:51 pm 37
New Listings 210
Price Changes 49
Sold Listings 47
TI:12565
http://www.paulboenisch.com
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January 10th, 2013 at 6:59 pm 38
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January 10th, 2013 at 7:50 pm 39
2013
2012
2011
Average sales over first 7 workdays:
2013: 56
2012: 59
2011: 72
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January 10th, 2013 at 7:54 pm 40
All’s quiet on the Western Front. Is it really true that Umberto has sold the Il Giardino site to a condo developer?
Hot debate. What do you think?
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January 10th, 2013 at 9:54 pm 41
Regarding the Il Giardino site – the property taxes alone on that site make it extremely expensive to run a business at. (it’s in the multiple 10’000′s per year) I always wondered how long that could go on for. Look at the block next door on Pacific where all the restaurants there for the past 7 years have gone bankrupt and now it is empty. The block with Il Giardino is prime for development of some type so if I was him – I would do it.
Hot debate. What do you think?
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January 10th, 2013 at 10:03 pm 42
I’m just asking but – - does it appear that the listings have slowed? We have barely had any 300 days and definitely no 400 days yet. Are we talking a 20-30% decrease in listings pace? How do we compare against 2009?
I don’t have my model up and running at this point but may get it going again next week so any thoughts would be helpful.
We should all take note however that one of the most relevant pictures shown right now is the pace of decline of the market from peak in the first 6 months. It is faster than any other US city during the US crash. That trajectory does not look good for Vancouver.
Hot debate. What do you think?
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January 19th, 2013 at 10:49 pm 43
The guy is just pain wrong. “People don’t have to sell”. Right, you’re paying the mortgage at boom valuations and you keep seeing your property value drop but you just decide to keep paying hoping for an increase in the future. One problem, this bubble isn’t related to correction in the condo market, its connected directly to the true state of the economy. It won’t be long before the drop in value correlates with a huge slow-down in the economy. When people are unable to pay their mortgage, and the choice is sell extremely low or default and lose everything, you will see the buyers market emerge just as it did in the US. Unfortunately, the value of the dollar will also decline, so unless you have a larger stockpile of cash than your buying budget, you will lose your buying power. The only ones who will make gains in this market are those that ride out the bull market on precious metals, and then transfer that wealth to property at the right time.
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