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yvr2zrh
Member
A few extra sales posted today. . . Some thoughts on what I am seeing from today’s transactions. 1.) Most of the 10 Van West SFH sold today have been listed for the past year and most took sales discounts from last spring’s asking price of 20-35%. 2.) A few “2 year old” condos sold downtown. Looking under the details – you can see these were sold by the developer as they did not sell in pre-sale or at completion. Specifically Alto on Howe and the Aquilini buiilding on top of the old Richards on Richards. How many more of these “Shadow new units” are still for sale? – – These sold for 5-10% less than what they were asking. 3.) The numbers are still bad. Sorry I did not post much on the weekend. For now, here are some… Read more »
G
Guest
G

@yvr2zrh

Regarding 2 year old downtown condos, is there way to know how many “shadow condos” are own by developers? Just curious about which buildings have the most “unsold” units after 2 years.

patriotz
Member

As VHB memorably pointed out, the real issue isn’t really affordability (however measured), it’s value.

Buying is far more expensive than renting for every property in the metro, therefore buying any property in the metro is the wrong decision at today’s prices. Whether or not you can afford to buy that property is beside the point.

crabman
Guest

When affordability gets too bad, simply change the methodology!

This is similar to what Realtors™ in California did at the height of their bubble. They used to report the Housing Affordability Index using the median priced home. But when less than 10% of households could afford the median priced home in many counties, they started to report the First-Time Buyer HAI – using the price of an “entry-level” home instead. Suddenly, affordability improved.

http://www.car.org/marketdata/data/ftbhai/

jesse
Member
UDI has carefully structured their “index” to concentrate attention to the attributes of the market most amenable to future sales. This is strategic, well-planned, and wholly dangerous for investors/owners. What they did with this index: 1) Concentrate on regional differences. The aggregate numbers correctly hide relative underperformance of some areas and dwelling classes, instead of reporting the headline numbers as do Teranet and MLS. 2) They concentrate on condos. This is evidence this index is targeting encouraging first time buyers to buy. 3) They downplay opportunity costs. Affordability measures are created for SFD where higher down payment levels are assumed. This hides the purchases’ “value” (as patriotz/VHB stated) 4) The index is based on affordability. Any index that uses medium-term financing rates as justification of affordability is dangerous. Even departing BoC governor agrees. This index is a marketing tool designed… Read more »
JR
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JR

@yvr2zrh or anyone else.

How common is it for a condo or housing development to have units for sale but not in the MLS system? Unless I’m mistaken I’ve seen this in several instances and as developer inventory builds up how of it is in this saving face “shadow inventory”?

BTW this might have been posted before but I was looking at a RE newspaper insert from REW.ca, they quoted Klein and Olson how sellers aren’t going to budge on price and that the thing that might bring buyers back into the market is this buyers insurance by some Calgary group called 180 solutions, where you can get back up to 5% if the HPI drops that much for your area in a year.

yvr2zrh
Member

On the “shadow inventory”. I was quite surprised to see the units. The unit in the Alto building was not on MLS at all until the fall. This building was sold in 2007 so this is 5 years later. Not to mention that most owners in that building have been selling for losses on the 2007 pre-sale price.

The Aquilini building on Richards – I am sure there are a bunch more. I remember they had to redraw the layout on this as the units had to be smaller in order to sell . . Now – – prices are still falling.

No real way to know also as many units are no longer showing as age of “0” but “1” or “2”.

Simple Solution ...
Guest
Simple Solution ...

… just start a popular local blog & get Rennie to pay you as you blow smoke up his a$$!
http://www.biv.com/article/20130214/BIV0121/130219966/life-in-the-village-pays-off-for-local-webzine-editor

Apocarypse Mao
Guest
Apocarypse Mao

As prices keep dropping, eventually the UDI will be right.

Anonymous
Guest
Anonymous

of course, silly bears do not agree with the article. silly bears do not live in the surrey nor condos. they are entitled to live in west side or kit only in SFH with a big yard.

VultureBoy
Guest
VultureBoy

I don’t understand why Fortis BC wants to be involved with this bizarre “housing affordability index”. Can someone explain?

Short'em High
Guest
Short'em High

@VultureBoy Says:
… why Fortis BC wants to be involved with this bizarre “housing affordability index”.

One obvious incentive a privately owned residential pipeline and electricity network would have is to maximize rents accruing to their existing network infrastructure investment. Population densification works against the profitability of the more remote parts of their network. Thus, it is in the firm’s interest to understand and even promote a more sprawling population distribution in general.

A summary of their acquisitions and basic business can be found here:
http://en.wikipedia.org/wiki/FortisBC

From the same argument a case could also be made that the Province of BC has untapped economic incentives to build significant roads, watersheds, electric transmission network to undeveloped parts of the province in order to lower land costs and promote increased economic activity.

Many Franks
Guest
Many Franks

Try out The Real Estate Ad As The True West Coast Literary Genre — I thought it was hilarious. I’d say he’s got BC nailed except for one minor quibble (we have bedbugs here, not termites) and one considerable flaw (real estate agents are rarely particularly literate and it’s painful when they pretend).

Ralph Cramdown
Guest
Ralph Cramdown

At the end of the US boom, housing Cassandras were calling this sort of behaviour (i.e. focusing on affordability of far suburbs and exurbs for first time buyers) as “drive ’till you qualify.”

Of course, it could equally be called “qualify, then drive” as that’s what you and your spouse will spend the rest of your lives doing. Those affordability calculators should also consider the cost of insuring and fuelling two vehicles for that long commute to wherever. The cost in time and quality of life is a little more difficult to quantify.

VultureBoy
Guest
VultureBoy

Yes, Short em high, I see your point. I was not thinking cynically enough. Thanks.

It isn’t a lot of money for them but seems risky to associate their brand with such an index at this part of the housing cycle. But perhaps they feel that they can influence zoning to their benefit.

Best place on meth
Member
Best place on meth

The affordability index piece assumes a down payment of 10%.

I’m assuming that 10% down will be wiped out within a year.

Therefore, buying is a terrible move.

WyWyWa
Guest
WyWyWa

Slightly off topic, but hopefully generally useful to people. I’ve reviewed the Vancouver Price Drop graph (8 February) that indicates the prices in Vancouver are tracking with the drops observed in Miami (although it appears to me that the data tracks better with Seattle). I eyeballed the price bottom of the 14 cities and came to a floor at 39+-6 months from peak. What was more interesting to me was looking at when prices were first within 5% of the eventual floor. With some room for error in my eyeballing, I came up with 30+-3 months. Thus, for my family, I project that October/November 2014 is likely to represent a good time to re-engage in the market. (We sold in spring 2011 and are renting for now.)

patriotz
Member

At the end of the US boom, housing Cassandras were calling this sort of behaviour… “drive ’till you qualify.”

Here’s what happened when the drive was no longer needed

patriotz
Member

” What was more interesting to me was looking at when prices were first within 5% of the eventual floor. With some room for error in my eyeballing, I came up with 30+-3 months.”

That part of the decline was under normal interest rates. Then the rates were dropped at the end of 2008, resulting in a much slower decline (or even a bounce in some markets) leading to an eventual nominal bottom in 2012.

Vancouver (and other Canadian markets) are starting their decline under low rates, with a possible rise later. Sort of the inverse of the US, which makes me think its rate of decline is not a good model for Canada. But the outcome will be the same eventually.

Short'em High
Guest
Short'em High

@WyWyWa Says:
…eyeballed the price bottom…

Unless you are trading lumped derivatives on home prices, I would suggest narrowing your criteria to the rent equivalent risk free price. When the home you want lingers at some price below the rent equivalent risk free price as measured from your situation, you should buy.

There are some remarks about it on this forum. @Patriotz is big on a strict present value accounting model, but IMO with a decent depreciating rent/buy calculator you can get very good estimate of your own risk free bid price by derating according to comparable equivalent rent and a future buyer’s hypothetical mortgage cost based on your worst case liquidation time horizon.

I think it is more about timing your own bottom rather than the bottom reported by various indexes.

Hey You Guys
Guest
Hey You Guys

at the current rate of price depreciation when are prices projected to reach bottom?

it’s my understanding that the bottom is 2001 price level according to partriotz, vreaa, VHB.

will we see this level before 2020?

WyWyWa
Guest
WyWyWa
@Short’em I fully agree that from a pure economics perspective, one should consider such values. However, the purchase of a residence is not strictly an economics problem, but a blend of economics and family considerations. I prefer to own for a mixture of reasons, but the economics got sufficiently insane to push me to rent. In the long-run, I will buy when I perceive the market correction has come close to a bottom (without trying to time it precisely, but trying to minimize risk). As I doubt we will have much capacity to predict the bottom based only on our local data (which is highly dubious due to the real estate cartel), predictions informed by other markets makes the most sense to me. I agree that the situation at present and in Canada is not exactly the same as the… Read more »
Best place on meth
Member
Best place on meth

“at the current rate of price depreciation when are prices projected to reach bottom?”

3 years if rates stay the same, less if they go up.

The rate of depreciation will accelerate in the second half of this year.

Short'em High
Guest
Short'em High

@WyWyWa Says:
…a pure economics perspective…

To be clear, I was suggesting a trading model based on your own book (family situation, earliest liquidation horizon, etc), not an economic model.

Macroeconomic projections such as rate of asset price decline and future interest rates are inputs only. You are free to choose both aggressive and conservative values for the inputs as they fit the best available information.

Makaya
Member
Makaya

Coming this Saturday on the Globe:

I thought you might be interested to know I’m going to do a piece for this Saturday on local real estate. My editor is keen on exploring some of the reasons for the soaring prices of Metro Vancouver homes: Fear and manipulation? Wealthy immigrants? Foreign investors? Organized crime? Should be interesting.

Stay tuned…

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