Open Topic

FFFA! Price! Decline! How low?

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116 Comments

Hey! You made it to the end of another work week!

Now it’s time for us to do our regular end of the week news roundup and open topic discussion thread for the weekend.

Here are a few recent links to kick off the chat:

–How low will house prices go?
–Banks see slowing mortgage growth
–Vancouver prices soften
–13k party time!
–Bad time to be a realtor?
–Pricing property in a falling market
–Majority want to invest but cant afford to
–Goodbye Waldorf
–Sales sunnier outside Vancouver
–A relaxing 80 minute drive
–Gov loses student loan info

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

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Sheesh

“House near me where an old Greek couple lived sold over a year ago for a couple million to a developer. They transformed it into a 3 suite main house and coach house.”

Is it on West 11th? If so, I have been wondering about that place! If only for the odd brown-on-top, black-on-the-bottom paint job. Also I was walking by one day and overheard a contractor flipping out about some sort of quality problem (couldn’t walk slow enough to hear the whole conversation).

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jesse

What the heck. Here you go, to November 2012.

http://housing-analysis.blogspot.ca/2013/01/city-of-vancouver-permit-update-for.html

If you are thinking there is going to be a recession in 2013, at least insofar as building permits in the City of Vancouver are concerned, it looks as if there will be a fair amount of building activity in 2013.

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jesse

“A BC recession is here”

Now that’s an interesting call! Vancouver-area construction activity is the last holdout province-wide. If you believe that recessions are front-loaded with a fall in residential construction activity, 2013 will be interesting to watch. It looks like Vancouver-area housing starts peaked about 4 months ago.

Another stat I track is Vancouver City permits. I’ll update my numbers and put them up on mohican’s blog in the next couple of days.

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HAM Solo

@ Pink Helicopter

A top-to-bottom, province-wide bear market in real estate. No other way to put it.

At this point, it does not make economic sense to develop a residential property anywhere in this province. Watch for the construction trades job numbers to plummet as projects complete. A BC recession is here.

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Anonymous

House near me where an old Greek couple lived sold over a year ago for a couple million to a developer. They transformed it into a 3 suite main house and coach house. About eight months ago they came up for sale, averaging a little over a million ask on each.

This weekend I was out for a walk and I saw that all four are now for rent with the same real-estate company that was trying to sell them before.

Yikes! I’m thinking that developer bet the farm on current market softness being only temporary.

Obviously even the professionals are delirious.

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jesse

PinkHelicopter: “where have all the buyers gone”

Based on my quick analysis,
1) Pop growth outside of Vancouver is very low. The growth that is occurring, as of about a year ago, was concentrated in Vancouver.
2) International immigration has dropped in the past few years.
3) People are leaving BC, predominately for Alberta.

Fewer sales because population growth is ebbing, especially outside YVR. Add in credit tightening and some lethargy in the resource sector and that’s what we used to call a “combo attack” in Street Fighter 2.

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patriotz

“Patriotz can have risky investments such as PGF”

Why not as long as I limit my exposure – which happens to be about 3.5% of my net worth outside my RRSP.

As opposed to homedebtors whose residences represented 2000% at time of purchase, and some of whom have passed through infinity and come back on the negative side.

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UBC in Crisis Mode

A new “sold” sign on Van West:

Driving along the Marine Drive yesterday and noticed a “sold” sign.

http://www.realtylink.org/prop_search/Detail.cfm?MLS=V984285&REBoards=All&From=MLS

It used to be $3,180,000 and re-listed recently for $2,980,000 by Julia Lau.

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Anonymous

@UBC in Crisis Mode Says:

SAGE III is a turnkey condo investment…

Right off the top, they spelled “turkey” wrong. (No offense, @Turkey.)

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Old School

@ wakeup call #97

Agreed that low sales is the big story. Generally, the more illiquid a market becomes, the lower the price a buyer is willing to pay in order to compensate for the extra risk.

There will be some initial stickiness from sellers, but in this type of tug-of-war it is usually the patient buyer that wins.

Perhaps Vancouver RE is different but, I doubt it.

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UBC in Crisis Mode

Better chance in other cities?

Just found this in e-mail:

Are you looking for the great return of real estate without the stress of management?

SAGE III is a turnkey condo investment with professional management and 10% return from guaranteed rental income. The project is in a high demand location next to the new $100 Million Wilfred Laurier Business School Complex in Waterloo, Ontario.

Special VIP Sale gives you the chance to:

– BE THE VERY FIRST TO BUY AT THE LOWEST PRICES

– 100% LEASE GAURANTEE

– 35% + RETURN ON INVESTMENT IN THE FIRST YEAR

– FREE PROPERTY MANAGEMENT

– COMPLETE FURNITURE & APPLIANCE PACKAGE INCLUDED

– LUXURY FINISHES, APPLIANCES & DÉCOR

– WATERLOO IS ONE OF THE FASTEST GROWING COMMUNITIES

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Romeo Jordan

We need two things, in the short term, to drive prices lower.

A large/quick increase in For Sale signs birthing onto a lawn near you.

More negative MSM spin.

Fingers crossed.

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Anonymous

“Patriotz can have risky investments such as PGF just as others can invest in Vancouver RE if like them he can afford the capital losses”

Both may be risky but one you have to drop a $million on and there is a poor yield, no liquidity, high transaction costs and no potential for earnings growth.

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Anonymous

I think Patriotz is invested in Pengrowth traded on the TSX and indeed has a yield close to 10% but has a payout ratio around 150% also high yields like this give me pause on putting my cash in this stock

Patriotz can have risky investments such as PGF just as others can invest in Vancouver RE if like them he can afford the capital losses as the results of these investment decisions

But best of luck

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Pink Helicopter

BCREA sales and inventory stats are out for the month of December 2012. Here are your Months of Inventory (MOI) calculations. BC Northern Inventory: 1876 Sales: 154 MOI: 12.2 Chilliwack Inventory: 1237 Sales: 106 MOI: 11.7 Fraser Valley Inventory: 5834 Sales: 602 MOI: 9.7 Greater Vancouver Inventory: 13902 Sales: 1171 MOI: 11.9 Kamloops Inventory: 1632 Sales: 80 MOI: 20.4 Kootenay Inventory: 2349 Sales: 91 MOI: 25.8 Okanagan Mainline Inventory: 4603 Sales: 230 MOI: 20.0 Powell River Inventory: 184 Sales: 10 MOI: 18.4 South Okanagan Inventory: 1404 Sales: 45 MOI: 31.2 Northern Lights Inventory: 196 Sales: 7 MOI: 28.0 Vancouver Island Inventory: 4367 Sales: 257 MOI: 17.0 Victoria Inventory: 3055 Sales: 258 MOI: 11.8 Provincial Totals Inventory: 40639 Sales: 3011 MOI: 13.5 Outside Vancouver Inventory: 26737 Sales: 1840 MOI: 14.5 I now have data going back 2 full years. Here’s an… Read more »

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Short'em High

Worst time in 31 years to buy RE Says: January 20th, 2013 at 8:29 am …grumble about REITs for years… jump in here off topic…. What about RE(IT)s isn’t relevant to RE? R and E are the first two words! Also, any credible commentary most certainly should include what to do with the capital that is not being allocated to overpriced RE – at least until prices come into line with rents one way or another. Some comments involve moving to jurisdictions where RE is priced inexpensively with respect to rents. Fair enough. Yet, for those who have no plans to move, there is still the problem of what to do with all the cash – including earning a return that pays the rent. Investing hard cash (or borrower obligation against real cash) into physical RE where the market is… Read more »

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Bag it and tag it

Patriotz #91
If you bought PGF above the current price and the current dividend is 6.5% (according to bloomberg), how is the yield 10%?

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jesse

“And let’s not forget that last January was pretty awful compared to historical averages”

That is correct however January is not a strong indicator for the rest of the year. Two examples are 2009 and 2010, as I mentioned. That stated, recent weakness is arguably a necessary condition for a worsening picture in 2013.

I just don’t like seeing bears disappointed like I did in ’09 and ’10!

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Wakeup call

Like I’ve been suspecting, Low Sales is turning out to be the big story this year. I think that is much more important than new listings right now. A flood of listings will come just as soon as sellers stop dreaming.

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An Observer

Compared to January 20, 2012 this is where we stand using one week averages for listings, sales and price changes:

Inventory up 4%
New Listings down 18%
Price Changes up 18%
Sell/List down 15%!
Sales down 30%!!
MOI up 49%!!!

And let’s not forget that last January was pretty awful compared to historical averages.

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Worst time in 31 years to buy RE

patriotz #91

“I asked you why you would buy them with today’s yield”

I never suggested or even hinted that anyone should buy them in the first place. I merely pointed out that they were the biggest 2 residential REITs. However, having heard you grumble about REITs for years (not unlike your political views), The only reason I responded was because I sort of expected you to jump in here off topic.

That said, I love your comments when you stick to RE.
Sorry if I ruffled your feathers.

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Q

Here’s another accolade for Vancouver that the real estate pumpers can use. In addition to being the best place on earth where you can ski, golf, and sail all on the same day, Vancouver is now regarded as “the crown jewel of the Pacific Northwest” when it comes to kinky sex. From the Vancouver Sun: “A good starting place for anyone aspiring to check out Vancouver’s very active alt-sex scene, or just to spice things up, would be Doig’s Thursday night seminar: Your Guide to Erotic Vancouver… The scene has grown so much over the past two decades, with regular events run by MVK, that Doig says Vancouver is known as “the jewel of the Pacific Northwest” for sexual adventurers. It’s not something that’s been exploited by Tourism Vancouver yet, but if the Taboo show continues to have its annual… Read more »

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Old School

#75

Indeed. From the Broadwalk REIT Q3 MDA:

“Although Boardwalk has not acquired any new apartment units during 2012, we continue to be active in the bidding process; however, Boardwalk has not been able to conclude that acquiring these assets at the offered selling prices would be in the best interest of the Trust on a risk-adjusted basis.”

Document available at http://www.sedar.com

REIT unit prices and their business models have benefited from BoC negative real rates. When that trend goes into reverse, we’ll see what happens.

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Old School

to exhale #80

Excellent point on the rising Filipino influence on local immigration numbers.

YVR is a key point of entry and it may have a distorting impact on the immigration stats. The bulls cling to those stats, hoping new residents will support the current Vancouver market, even at current prices.

But as you more or less infer, just because someone lands here doesn’t mean they are going to rush to the next open house on Dunbar. Particularly when renting is so much cheaper for those who decide to stay, but actually have to work for a living.

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patriotz

“why would you buy a REIT with yields that low?”

Because I bought them about three and a half years ago along with several others when CAR.UN was less than half today’s value and BEI.UN less than a third of today’s value.

I asked why would you buy them with today’s yields. Given that you bought them years ago, why are you holding them with such low yields? Where’s the upside going to come from?

You still holding PGF?

Yes, current price is below my cost base but I’m not going to sell now when I’m getting a 10% yield.

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