Most expensive listing sees biggest price drop
Anyone remember a story about the most expensive real estate listing in all of Canada?
It made news first for the obvious reason: most expensive property in the country!
Then it made some blogging news because the pictures of the really weird house turned out to be imaginary.
But you got to figure with all that nation wide exposure it must have sold for a pretty sum right?
As observer points out that’s a $25 million (or 66 percent!) price drop in less than a year!
Surely at that rate we must have the biggest asking price collapse in all of Canada here.
If you’re into extrapolation this means that in one year they’ll pay you six figures to take it off their hands.
September 3rd, 2013 at 1:03 am 1
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September 3rd, 2013 at 5:03 am 2
Canada’s housing market among most ‘bubbly’ in world, Economist finds
It was the Economist, of course, that produced the classic report in 2005 that identified the global housing bubble and predicted severe consequences.
Of course the findings by the Economist show that the federal government never intended to “head off” a bubble in the first place.
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September 3rd, 2013 at 8:27 am 3
Regulator eyes tighter mortgage rules
Sep. 03 2013
Canada’s banking regulator has been gathering detailed mortgage information from financial institutions, in what could be a precursor to changes in the rules for home loans.
The Office of the Superintendent of Financial Institutions (OSFI) has spent months considering a tightening of mortgage rules for lenders, a decision that’s being weighed as the housing market begins to pick up after a year-long slump. That slide began when Finance Minister Jim Flaherty tightened the rules for mortgage insurance in July, 2012.
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September 3rd, 2013 at 9:02 am 4
This property appears to have been subdivided. The original listing was 34k sqft, and the current listing is 26k.
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September 3rd, 2013 at 10:58 am 5
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September 3rd, 2013 at 11:01 am 6
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September 3rd, 2013 at 11:02 am 7
“This property appears to have been subdivided. The original listing was 34k sqft, and the current listing is 26k.”
It is more likely that the listing agent got the information wrong intitially.
Hot debate. What do you think?
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September 3rd, 2013 at 11:15 am 8
@RealityCheck: why are you comparing against 2002? Who cares about 2002? 2002 was just the very beginning of the real estate bull market where buying made perfect sense vs renting, which around 2006 turned into a flat out bubble.
Hot debate. What do you think?
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September 3rd, 2013 at 11:20 am 9
“Lot 380K, Building $300K”
If the rent on the existing structure is high enough compared to the rent received after redevelopment costs, perhaps it’s not quite ready for said redevelopment. I might suggest your comparison needs some time discounting.
What was Buffett’s line again?
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September 3rd, 2013 at 11:53 am 10
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September 3rd, 2013 at 12:23 pm 11
“Rent ratios don’t matter in a globalized world”
Good one.. why would anyone look at the cost of a substitute when looking to purchase a product?
Classic bubblespeak.
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September 3rd, 2013 at 12:24 pm 12
Who has Van West sales data for July and August?
From one web site, Van West:
Month / New listing /Sale
July / 292 / 120
Aug / 120 / 20
20 is pretty low?
Hot debate. What do you think?
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September 3rd, 2013 at 12:30 pm 13
” “2013 Central Surrey: New house costs $680K
–> Lot 380K, Building $300K
2002 Central Surrey: New house costs $320K
—> Lot 170K, Building 150K”
Inflation since 2002 has been about 30%. So 2002 prices adjusted for inflation would be:
–> Lot 220K, Building $195K, for a total of 415K.
Your “catastrophic crash” value is still 33% above inflation.
P.S. I love the comment about Surrey having run out of land!
Hot debate. What do you think?
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September 3rd, 2013 at 12:48 pm 14
Fellow bears!
The lazy, hazy days of summer are over.
The kids are back at school.
Traffic congestion is also back with a vengeance.
Did I mention the rain.
People are back behind their desks, collecting their meager paycheques, wondering why the heck they just bought an overpriced shack that will burden them financially for most of the rest of their lifes.
Bye,bye summer vacations, new car and decent clothes.
Hello, leaky roof, broken down fence and appliances.
And then the horror of seeing your equity going down the drain either quickly as this giant RE bubble bursts or slowly through a thousand price cuts.
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September 3rd, 2013 at 12:52 pm 15
RealtyCheck: “Now, where can these values possibly crash to?”
It depends on how much rent or net income the 680K property can generate. If the house rents for $2000 per month then a good guess would be 240K to 360K which falls into the 10 to 15 price to rent range.
Once the house is built the cost of building it is irrelevant. A perfect example is the Olympic Village. The developer went bankrupt because their cost to build it was higher than buyers were willing to pay. During bubbles building costs go up because of demand for the trades, etc. Once the bubble bursts the cost to build those OSB houses in Surrey will be significantly less. Trades peoples wages will go down, builders margins will go down and land values will plummet. There were plenty of houses sold below cost to build in the US, Spain, etc after the bubble popped in those countries. Surrey will not be different.
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September 3rd, 2013 at 12:59 pm 16
RealtyCheck: “My circle that rents would buy in a heartbeat if prices in Surrey fell by $75,000. There is huge pent up demand at this price level.”
You are correct there will be lots of people that WANT to buy once prices are down another $75,000. The problem is most if those people will have already bought and or will not be able to get financing to buy. That is why the prices go down in the first place. Because the bubble runs out of greater fools who can get a mortgage.
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September 3rd, 2013 at 1:02 pm 17
Here is a link to the Economist’s latest article on global house prices. As in past articles, it indicates Canada’s market is overvalued.
http://www.economist.com/news/finance-and-economics/21584361-america-surges-much-europe-sinks-mixed-messages
Note that the % overvalued (compared to rent) figure represents a comparison of current real estate values and rental rates to their historical averages, NOT a comparison of the cost of owning versus the cost of renting.
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September 3rd, 2013 at 1:10 pm 18
“Once you own a plot of land after 25 years, it is yours, your kids”
LOL…By that time at the current tax vs income growth rate, your kids will be paying 15% of their income on property taxes alone. http://i.cubeupload.com/6tQnFz.png
Hot debate. What do you think?
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September 3rd, 2013 at 1:26 pm 19
KopyrightKlepto
It wasn’t subdivided. Look at the current description “26,000 +/- sqft(according to BC Assessment-with notice of possible change) offering approximately (subject to change feet) of waterfront”
Original realtor or seller got the size wrong – too busy making fake pictures
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September 3rd, 2013 at 1:30 pm 20
Can somebody explain WTF this realtor is smoking to come with price change?
http://univs.ca/property/mp-mount-pleasant-ve-vancouver-east-greater-vancouver-vancouver-bc-v6a-4h8/
Hot debate. What do you think?
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September 3rd, 2013 at 1:38 pm 21
@snake: Ever see a paramedic apply a defibrillator to a dead body? It’s pretty much the same thing.
The difference is that a paramedic will have given up by the time 6 months roll by.
Hot debate. What do you think?
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September 3rd, 2013 at 1:39 pm 22
Aggregator # 18
Agree, rising property taxes will take a heavy toll on homeowers in the future.
Upgrades to dykes and earthquake protection costs will be in the millions.
Richmond estimates that these costs will be about 180 million just for Richmond.
http://www.richmond-news.com/news/new-provincial-dyke-standards-to-hurt-richmond-budget-1.498755
Hot debate. What do you think?
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September 3rd, 2013 at 1:48 pm 23
LOL, Many Franks, you crack me up.
@snake, scroll down and see price change history: 120k up, 120k down, 120k up, 120k down since March..LOL, dead corpse.
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September 3rd, 2013 at 1:57 pm 24
The Realtor’s name is T.S. Mock.
That should explain it.
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September 3rd, 2013 at 2:46 pm 25
S&P says US government’s lawsuit is “retaliation”
Standard & Poor’s says the U.S. government sued the ratings agency as “retaliation” for its downgrade of the country’s credit rating.
The Department of Justice filed civil charges against the rating agency in February and is seeking $5 billion in penalties.
The government claims S&P refused to warn investors that the housing market was collapsing because it would be bad for business. It also says S&P knowingly inflated ratings of risky mortgage investments that helped trigger an economic crisis.
S&P denies the claims and said in a court filing that it is being sued in retaliation for a downgrade of the country’s top-tier credit rating in 2011.
AP wire Sept 3, 2013
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September 3rd, 2013 at 3:14 pm 26
Many Franks Says:Ever see a paramedic apply a defibrillator to a dead body? It’s pretty much the same thing.The difference is that a paramedic will have given up by the time 6 months roll by
————————————-
They should have struck with original price and the place would sold by now, people got greedy
=============================================
Saver Says:scroll down and see price change history: 120k up, 120k down, 120k up, 120k down since March..LOL, dead corpse.
———————————-
The reason I posted that comment was I did scroll down
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September 3rd, 2013 at 3:29 pm 27
That deafening silence you hear is the sound of the Canadian housing bears gone quiet,” Bank of Montreal economist Robert Kavcic wrote in a research note Friday. “Not only has the resale market absorbed last year’s round of mortgage rule tightening, but the supposedly at-risk banks have just recorded a unanimously better-than-expected earnings season, with a handful of dividend increases to boot.”
from VMD’s mop and pail linkie poopie
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September 3rd, 2013 at 3:36 pm 28
http://www.bmonb.com/economics/reports/20110601/bb201106.pdf
Doug Porter is often quoted in the press regarding housing, CPI, and other fudgepacker government data. Porter teams up with Kavcic in this 2011 report, when Porter was with BMO.
ain’t it nice, reading these economist at their cozy jobs with untouchable Canadian banks?
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September 3rd, 2013 at 3:37 pm 29
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September 3rd, 2013 at 3:37 pm 30
The deafening silence of the summer lull will soon be followed by the stampede of panicky RE bulls running towards the cliff.
Hot debate. What do you think?
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September 3rd, 2013 at 3:40 pm 31
http://www.cowichannewsleader.com/news/221536601.html
this link is for Kavcic… please read it Robbie, especially the first part where it says “The housing construction bubble in Cowichan was a balloon in the first decade of the new millenium. Then it burst”
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September 3rd, 2013 at 3:44 pm 32
# 29.
The “gazillionaires” are not stupid to invest in a flood plain and earthquake zone.
But you are right about Richmond being a Chinese enclave.
Next Mayor will be Chinese born.
Hot debate. What do you think?
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September 3rd, 2013 at 3:52 pm 33
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September 3rd, 2013 at 4:00 pm 34
Factories in Richmond?
They’ve long ago packed up and moved to Surrey or Burnaby.
Only empty condo towers where they once were located.
Hot debate. What do you think?
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September 3rd, 2013 at 4:33 pm 35
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September 3rd, 2013 at 5:45 pm 36
Listings galore today.
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September 3rd, 2013 at 5:51 pm 37
“My circle that rents would buy in a heartbeat if prices in Surrey fell by $75,000″
You don’t have to get all uppity about someone pointing out that construction costs outpacing inflation can be consistent with falling real land values. Your friends are more than welcome to buy if prices drop by $75K; certainly nobody is holding a gun to their heads. (Though I don’t live in Surrey and don’t know your friends, so I cannot in all honesty validate that.)
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September 3rd, 2013 at 6:24 pm 38
Softy @ #7:
“It is more likely that the listing agent got the information wrong intitially.”
Or maybe the tide wasn’t out during the second measurement.
/sarc
Hot debate. What do you think?
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September 3rd, 2013 at 6:56 pm 39
New Listings 369
Price Changes 125
Sold Listings 137
TI:16739
http://www.paulboenisch.com
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September 3rd, 2013 at 8:50 pm 40
down comes the rain, down comes the market
Hot debate. What do you think?
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September 3rd, 2013 at 9:16 pm 41
CAUTION: (HARD HAT AREA ONLY)
falling re
P
R
I
C
E
S
Hot debate. What do you think?
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September 3rd, 2013 at 9:52 pm 42
70 stories Tower planned for the Westend.
The “Honglongnisation” of Vancouver is continuing.
http://www.straight.com/news/415311/west-end-towers-draft-community-plan
Hot debate. What do you think?
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September 4th, 2013 at 4:46 am 43
“Note that the % overvalued (compared to rent) figure represents a comparison of current real estate values and rental rates to their historical averages, NOT a comparison of the cost of owning versus the cost of renting.”
Those are the essentially the same comparisons, because the historical cost of owning versus renting is much the same everywhere – i.e. cheaper.
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September 4th, 2013 at 6:21 am 44
I know there used to be factories in Richmond because my dad used to work in one in the 80s. He used the money he made as a labourer in a Richmond factory to rent a whole house in Vancouver with a yard. He even made enough money so my mum could be a stay-at-home mum. Because they rented a big nice house with a yard, my mum was able to supplement the family income by babysitting. Everybody in my family is barely holding on to a basic standard of living today. Everyone is living in the Fraser Valley. When we go to Richmond or Vancouver we feel like we are going to a foreign country and the local Chinese there basically make us feel like we don’t belong there either.
Hot debate. What do you think?
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September 4th, 2013 at 7:08 am 45
@nostalgic
+1000 for using the words local and chinese together.
Hot debate. What do you think?
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September 4th, 2013 at 7:32 am 46
” Everybody in my family is barely holding on to a basic standard of living today
and what that has to do with Chinese? shouldn’t you ask Canadian oligarchs what happened to your standard of living?
Hot debate. What do you think?
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September 4th, 2013 at 8:23 am 47
Stephen “Inanimate-Carbon-Rod-The-Second” Poloz continues to yank on the “do nothing” lever as hard as he can. (Ahem.)
Bank of Canada holds trend-setting interest rate at 1%:
Household finances continue to improve, hey?
Household credit *growth* has continued to slow, but it’s still growing faster than inflation (and looks really bad here on the West Coast). Nobody gets to brag about this until it’s growing below inflation. At that point we’ll have a big fat problem, but one that’s at least not worsening.
Hot debate. What do you think?
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September 4th, 2013 at 8:59 am 48
The August stats for the Greater Victoria Real Estate Board (VREB) have been posted in VanPeak:
http://vancouverpeak.com/Thread-VREB-2013-Sales-Data-Greater-Victoria-REB?pid=5323#pid5323
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September 4th, 2013 at 9:18 am 49
Strawman headline award contender:
“Why real estate doomsayers continue to be wrong”
http://business.financialpost.com/2013/09/04/canada-housing-doomsayers/
Warren Buffett was “wrong” on the tech bubble. And now look at him.
Hot debate. What do you think?
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September 4th, 2013 at 9:23 am 50
weasel words
n.
Equivocal words used to deprive a statement of its force or to evade a direct commitment; words used to avoid stating something forthrightly or directly; makes one’s views misleading or confusing.
e.g.: “a continued constructive evolution of household imbalances.”
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September 4th, 2013 at 9:34 am 51
@fixie guy: Exactly. Because if he’d said “Canadian debt statistics are reverting to historical norms,” which seems to be what he’s suggesting, it would be too easy to call him out as a liar.
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September 4th, 2013 at 10:30 am 52
As I summarized last week
Greater Van Sales +53% YoY,
MOI=6.4 (vs 5.6 in July)
Expect MOI to rise back to Buyer’s market (>7) by end of September.
Composite HPI price down 0.1% vs July, down 1.3% vs last year.
(Looks like we had higher sales but flat/dropping prices over the summer, despite the expiring-low-rate-hold cohort on their last shopping spree. Now imagine what higher rates and lower sales will do to prices for the remainder of this year)
(REBGV official report is here)
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September 4th, 2013 at 11:00 am 53
Province: “Vancouver home sales jump more than 50%, but prices lag”
At least the reporter starts out with some analysis and context:
“The country’s most expensive housing market is showing signs of surging sales but Vancouver is still lagging historical norms.To put the Vancouver market in context, last month’s major rebound still leaves sales 4.6% below the 10-year average for the month. August sales were also 14.7% below July figures.”
Hot debate. What do you think?
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September 4th, 2013 at 11:28 am 54
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September 4th, 2013 at 11:47 am 55
“still bears that think the crash is happening right now”
(raises hand)
The crash/correction/reversion has been going on for five years and counting. You’ve already missed the first quarter and part of the second.
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September 4th, 2013 at 11:58 am 56
REBGV Aug Stats available now.
I have just uploaded the Sunshine Coast HPI and Benchmark Price data for August and both continue to fall. The Benchmark Price is now down -22.5% from its July, 2010 all-time peak. Home values on the SC are taking a hit.
http://vancouverpeak.com/Thread-SC-Listings-Sales-2011-2013?pid=5276#pid5276
Hot debate. What do you think?
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September 4th, 2013 at 12:01 pm 57
Meant to add that the info has been added to the bottom of Monday’s post (Sept 2).
Skook
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September 4th, 2013 at 12:06 pm 58
History will mark August 2013 as the beginning of the collapse of the Vancouver RE market.
From now on the only question remains: How deep will it fall?
Hot debate. What do you think?
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September 4th, 2013 at 12:11 pm 59
VMD is the king of this blog. Thank you for your contributions, VMD.
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September 4th, 2013 at 12:18 pm 60
New high for the 5 year bond yield at 2.05%
http://www.investing.com/rates-bonds/canada-5-year-bond-yield
I look forward to this months mortgage rate hike, it’s becoming my favorite routine these days.
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September 4th, 2013 at 12:21 pm 61
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September 4th, 2013 at 12:24 pm 62
June 2013 HPI $601,900
August 2013 HPI $601,500
And that’s after the best 2 months of sales relative to 10 year averages since the first half of 2011. The move in rates hasn’t even been felt yet, and as BPOM points out fresh multi year high in the canada 5 year yield today.
I don’t see how bulls can spin this in a positive light.
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September 4th, 2013 at 12:26 pm 63
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September 4th, 2013 at 12:28 pm 64
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September 4th, 2013 at 12:57 pm 65
> That should be “are now softs”
that’s what your wife said
you should spend more time adding 8s to your prices, loyal cadre, and less time spreading harmony to the infidels on the web.
Hot debate. What do you think?
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September 4th, 2013 at 1:07 pm 66
> Most people who used to be bulls are not “softs” in that they expect a soft landing.
maybe if you weren’t a realtor you’d be able to lie better
http://youtu.be/mLHr_S6_OX8
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September 4th, 2013 at 1:19 pm 67
“If you are waiting for a an affordable house in Vancouver, you will wait forever.”
House prices are, by definition, never higher than affordable. Unfortunately for bulls, affordability varies independently from prices, moved by things like interest rates and government insurance policies. It is also possible for prices to go higher than is reasonable, which is to say, houses can cease to be a good deal, but they only stay that way as long as the buying public stays unreasonable. When affordability is lowered, house prices must follow, and when house prices are going down, people are less likely to speculate at unreasonable prices.
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September 4th, 2013 at 1:46 pm 68
The fact that prices haven’t budged despite the crazy buying frenzy of the last month is HUGE.
Like BPOM, watching mortgage rates creep up has become my favorite pastime, with those high sales days from baulb a close second. Another month or two of this insanity should pretty well take us to the end of the sucker line. Serious sellers would be wise to accept any reasonable offer before this thing dries up.
Hot debate. What do you think?
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September 4th, 2013 at 1:58 pm 69
“Condos went to the dogs in 2008″
It probably should set off some warning bells that people think detached is a can’t-lose investment but condos are trash. Though I generally agree one investing elsewhere since 2008 will have done better than Vancouver-area condos. I don’t follow detached prices much because I get confused easily.
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September 4th, 2013 at 2:00 pm 70
@59 China Bust
I’m just one of several who keep track of some stats, thanks to paulB’s tireless efforts.
Look to Jesse’s blog for population/employment stats and pretty graphs.
Also miss YVR2ZRH’s insights, looks like he’s too busy in Zurich..
Also, hopefully the “MLS Wikileaks” site will stay operational and updated.
The next few months will prove to be very interesting..
Hot debate. What do you think?
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September 4th, 2013 at 2:28 pm 71
“The fact that prices haven’t budged despite the crazy buying frenzy of the last month is HUGE.”
Yep.
It’s like running out of gas in your car. You push the accelerator closer and closer to the floor just to maintain your speed. Guess what happens next.
What could be a greater stimulus package to housing than a wild summer buying spree spurred by starry-eyed home-boners who think they’ll be priced out forever (c) if they don’t lock in their rate holds?
RE was flying off the shelves in July, and yet prices…dropped a little. Even according to the highly-manipulated HPI.
If not even low rates plus forced buying frenzies can push prices higher anymore, what do people think will happen when the new higher rates kick in? (No, Shifty, not everyone is confident taking on a variable mortgage — especially right now. Fixed rates exist for a reason.)
Many thousands fewer eligible/qualified buyers will be the mix at that point, and the rest will be able to feel the burst as intuitively as they felt the bubble.
Hot debate. What do you think?
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September 4th, 2013 at 2:36 pm 72
Naked # 65
Infidels? You mean White Devils. No?
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September 4th, 2013 at 3:02 pm 73
“materials cannot be duplicated at this price.”
really?
Again, wtf who would buy this boring 500 s.f condo for half a mil?
http://www.ecorealtyinc.ca/listing?id=260495547
Hot debate. What do you think?
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September 4th, 2013 at 3:39 pm 74
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September 4th, 2013 at 3:47 pm 75
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September 4th, 2013 at 4:02 pm 76
Well, there you go: Canada’s Most Expensive House Marked Down By $25 Million
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September 4th, 2013 at 4:17 pm 77
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September 4th, 2013 at 4:25 pm 78
http://www.huffingtonpost.ca/2013/09/04/mortgage-rates-2013-canada_n_3867472.html
“Given the enormous debt burdens Canadians have run up in these years of rock-bottom rates, an upward adjustment in interest rates — even if painful to homeowners — might be just what’s needed to keep Canadians out of bankruptcy court.”
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September 4th, 2013 at 4:29 pm 79
A quarter of Canadians live paycheque to paycheque
http://globalnews.ca/news/819182/a-quarter-of-canadians-live-paycheque-to-paycheque-bmo-survey-says/
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September 4th, 2013 at 4:31 pm 80
“Chinese and Indian city land prices are astronomical and that’s why the Economist doesn’t include them in their analysis.”
The Economist doesn’t include them for a number of reasons, the major ones being opaque systems of tenure which makes “ownership” harder to compare in the first place, unreliable statistics on all aspects of RE and incomes, and a property-owning cohort which is not comparable to Western countries.
Hot debate. What do you think?
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September 4th, 2013 at 4:36 pm 81
re #73 “who would buy this boring 500 s.f condo for half a mil?”
Couldn’t agree more. Too much risk and not nearly enough return if somebody wants to buy as an “investment” suite to rent out fully furnished. Similar size furnished suites are available in the same building. But I suspect turnover can be high at lease renewal time, so you would definitely need to factor in vacant months.
http://tinyurl.com/k9jq239
And, should it be a purchase for an owner-occupier, a standard 5% d.p. requires at least $70K income. Really, at 500 s.f., this is just a “starter” home. If it was a couple purchasing, on 2 $45K incomes, it would be easier to qualify for a mortgage. But then, how long could a relationship “survive” in such a small rabbit hutch? It would be on the market again in no time, I suspect.
On the plus side, they do allow pets. So that may be a selling point for getting higher rents. And this being Vancouver, maybe suites like this appeal to meet-by-the-hour careerists? It is a central location after all.
This just seems like another seller with “great expectations” on the pricing front.
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September 4th, 2013 at 4:54 pm 82
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September 4th, 2013 at 5:17 pm 83
“A quarter of Canadians live paycheque to paycheque”
and why we media likes to call us first world?
and that number is more like 50%.
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September 4th, 2013 at 5:29 pm 84
“There is more money there now you can possibly imagine. Believe me, that country’s citizens are just starting their buying spree. All 1,400,000,000 people.”
No, those locusts are just beginning their looting, raping and pillaging spree of the rest of the world.
http://www.nationalturk.com/en/china-illegal-miners-arrest-124-chinese-citizens-arrested-in-ghana-for-illegal-mining-africa-news-38653
Yet the stupid fuckers don’t seem to care they’re fast becoming the most hated people on the planet.
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September 4th, 2013 at 5:32 pm 85
New Listings 314
Price Changes 102
Sold Listings 125
TI:16812
http://www.paulboenisch.com
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September 4th, 2013 at 5:33 pm 86
While sales have been higher of late, inventory is still at an elevated level, albeit declining. As has been pointed out by VMD, MOI is around 6. Prices will rise slightly in this regime but not by much. Going forward price changes in the latter part of the year tend to be lower than in the first part of the year.
My assessment, FWIW, is that sales have rebounded slightly from the early part of the year, first evident starting in March before the recent rise in interest rates. There are a couple of plausible reasons for this:
1) Interest rates on mortgages, in part due to rate holds with the most recent increases, were low and that has improved affordability when paired with prices in early 2013 being down 4-5% nominal since the peak of 2012.
2) Population growth into Vancouver in 2012 was higher than in 2011, which can lead to more housing demand. (Sales tend to lag population growth by a few quarters.)
I expect these two effects to persist through the rest of the year. First we can expect, as VMD has pointed out, that demand in June-August was “brought forward” due to expiring rate holds. That, all else equal, will lead to a dearth of sales starting September and likely persisting through the rest of the calendar year assuming rates remain at current levels. Looking at the occurrence of sales drops coincident with rising interest rates since 1998, dropping sales occurs with high certainty.
Second I expect baseline demand to be somewhat stronger due to population growth in 2012 being more robust than in 2011. That will tend to increase sales through 2013, at least compared to 2012. Nonetheless population growth rates are not high; I expect sales to remain subdued relative to the 10 year average.
Combining the two effects I would expect the most likely path would be for sales activity to be between the 2010 and 2012 levels for the remainder of the year.
The Bank of Canada thinks sales are going to slow down going forward as well. If they’re wrong, that might not be the most bullish of indicator for 2014.
Hot debate. What do you think?
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September 4th, 2013 at 5:53 pm 87
vancouver flippers in trouble calling it quits
Either way, it doesn’t make sense to continue posting at this time.
When the market correction resumes, I might resume posting (if I’m still here). There’s a really nice city in the US that the wife and I are going to be visiting soon…
http://vancouverflippersintrouble.wordpress.com/
Hot debate. What do you think?
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September 4th, 2013 at 5:59 pm 88
“My assessment, FWIW, is that sales have rebounded slightly from the early part of the year, first evident starting in March before the recent rise in interest rates.”
That’s not what I see at all. Sales this March were terrible, and they were terrible in April and May as well.
There was no noticible bounce in sales until June, well after yields started rising.
Even with the bounce in sales the numbers aren’t the least bit impressive, only average as we’ve now gone 26 straight months without a 3000+ sales month – something that used to be a routine occurence during the bull market.
I maintain that this bounce in sales is 100% rate hold driven.
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September 4th, 2013 at 6:25 pm 89
“I maintain that this bounce in sales is 100% rate hold driven.”
agreed, i’m seeing it first hand with a few friends, it’s all i can do to bite my tongue.
I get, “well I’m safe now for 5 years anyway”, “can’t go wrong with these rates!”…crap like that
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September 4th, 2013 at 6:29 pm 90
and of course they all say, “sales are really starting to pick up again, that’s got to be a good sign!” … not seeing the obvious stupidity of their statement.
Hot debate. What do you think?
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September 4th, 2013 at 6:44 pm 91
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September 4th, 2013 at 6:58 pm 92
I’m putting together a spreadsheet with monthly HPI for each of the 20 residential areas in the REBGV area, for all types of housing. I’m not surprised to see that the REBGV doesn’t provide a breakdown of monthly sales by area, even though they do post charts, which rely on these data.
Does anybody know if it is possible to access monthly sales data by area?
TIA.
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September 4th, 2013 at 7:20 pm 93
The VANCOUVER REALTOR HUNGER INDEX for August 2013 was 62%.
Details and comparison data for 16 years at: http://vancouverpeak.com/Thread-Vancouver-Realtor-Hunger-Index
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September 4th, 2013 at 7:25 pm 94
REBGV stats package has sales and new listings by area. I don’t think they produce area-specific for-sale inventory data.
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September 4th, 2013 at 8:03 pm 95
@Jesse, 94.
Thanks, Jesse!
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September 4th, 2013 at 8:40 pm 96
“this bounce in sales is 100% rate hold driven”
Could be, I am sceptical the market is that dependent on rates. May’s strength (which would be sales booked in April) was evident right out of the gate; I doubt burgeoning rate rises that started at the beginning of the month would have registered with buyers. Sales starting in late May and through July would have been more rate-driven.
Rising rates have almost certainly elicited sales. I think there is a slight underlying demand that is greater in 2013 than 2012 due to more robust population growth in Greater Vancouver.
Hot debate. What do you think?
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September 4th, 2013 at 9:39 pm 97
Pretty silly to say something is 100% responsible for complex behaviour. However, in every case when rate increases or qualification tightening was announced, we have seen an immediate sales bump. That tells me marginal affordability is a big driver.
Hot debate. What do you think?
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September 4th, 2013 at 9:44 pm 98
@Jesse 94
REBGV does track area-specific for-sale inventory data, though only visible to people with MLS access I believe.
This is a link to the 2011-2013 data (in graphs form) of most Greater Vancouver neighborhoods
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September 4th, 2013 at 10:13 pm 99
@VMD
Thanks for the kind words. Believe it or not, I’m still reading through the site each day. I have lots of thoughts and I have a few models I want to work on but I’m a bit short on time.
Here’s a tidbit – - Why would North Vancouver have such a decrease from July-August for detached while Van-West was flat to slightly up? I always say that North Van is the true “middle class” barometer as is Burnaby typically. Even Coquitlam.
I think the latest interest rate hikes, to the extent that they continue, will be the biggest catalyst to first reducing volumes and then continuing to hit prices.
One thing I want to say is that I am pretty impressed with the current tone of the REBGV press releases. Pretty much factual and not full of spin.
Anyhow – I’ll see what I can do on the weekend with the August stats and then run some analysis to see what comes out.
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September 5th, 2013 at 12:10 am 100
|Yet the stupid fuckers don’t seem to care they’re fast becoming the most |hated people on the planet.
@BPOM #84
such disloyalty, cadre – your penchant for posting disharmonious propaganda from splittist imperialist running dog websites has been noted in your file.
Hot debate. What do you think?
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September 5th, 2013 at 4:31 am 101
The iconic Mary Kay mansion – asking $2,799,999
Hot debate. What do you think?
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September 5th, 2013 at 4:36 am 102
Van East mini-tenement – asking $2,980,000
Hot debate. What do you think?
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September 5th, 2013 at 5:31 am 103
@Patriotz
this city is off it’s nut
Hot debate. What do you think?
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September 5th, 2013 at 6:42 am 104
Hidden due to low comment rating. Click here to see.
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September 5th, 2013 at 7:10 am 105
Dallas Mary K Mansion vs East Van house
Look at the difference in property taxes. In Dallas you pay 120K per year in taxes compared to 7K per year in East Van. That has a lot to do with why prices are so cheap in Dallas. That level of taxation is ridiculous. According to Zillow the property taxes are double the estimated rent although the estimated rent seems way too low for that house. Maybe in Dallas the tenant pays the taxes?
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September 5th, 2013 at 7:51 am 106
” In Dallas you pay 120K per year in taxes compared to 7K per year in East Van. That has a lot to do with why prices are so cheap in Dallas. ”
Very much so. But there are reasons for this. One, if the average house in city A is cheaper than the average house in city B, then the amount of taxes paid on a house of a given price is going to have to be higher in city A, to get the same average tax take per house (other things being equal). That’s why a $1mil house in, say, Langley pays a lot more taxes than a $1mil house in Vancouver.
Two, you have to look at the amount of taxes collected at the provincial or state level. Texas has no state income tax. So, the total property tax take has to be higher to pay for schools and other services that would be funded to a large extent provincially in BC.
So what’s better? Higher income tax or higher property tax? I would prefer the latter, because property taxes cannot be evaded.
Hot debate. What do you think?
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September 5th, 2013 at 8:04 am 107
Canada 5 year rates spiking again this morning, now 2.13% that’s just 2 basis points away from a full 1% above the bottom in yields on May 2.
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September 5th, 2013 at 8:15 am 108
YVR – You’re forgetting the fact that the Mary Kay Mansion is comparable to this home in Vancouver – asking price $22M.
http://www.ecorealtyinc.ca/listing?id=260328279
At that assessed value, the property tax would be about $68k. The equivalent East Van property would probably cost $300k in Dallas and the taxes would be comparable.
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September 5th, 2013 at 8:44 am 109
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September 5th, 2013 at 9:03 am 110
@109, don’t underestimate rising bond yields.
you quote “3 years ago they were 3.5%”
let’s get some context into this
1. in Sept 2010, people are binging on P-0.7 to P-0.85 5Y Variable Rates
2. in last 1-2 years, variable rate discount significantly reduced. People have then been binging on record-low Fixed rate mortgages due to low bond yields.
3. Now, Variable rate discounts are still low, Fixed rates are rising. Mortgage Qualifying rates (which affects all 1-4 Y Fixed & Variable rate mortgages) have just risen by 20 basis points last Wednesday, the first rise in 500 days.
4. The idea of “qualifying rate” based on BoC’s posted 5Y rate was introduced only a couple years ago (someone can help look up)
5. If bond yields continue to go up, qualifying rate will edge up again, affecting not just mortgages but also HELOCs.
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September 5th, 2013 at 9:03 am 111
@Reality Check
Those renewing in 2008 got a taste of how rates can go up as fixed mortgage rates hit 6%. Yet you conveniently leave that out.
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September 5th, 2013 at 9:31 am 112
“People renewing now from 5 years ago are doing so at rates 1% below what they had.”
The time for that little bonus is quickly running out.
3 months from now people renewing from 5 years ago will be paying HIGHER rates.
Hot debate. What do you think?
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September 5th, 2013 at 9:45 am 113
The Vancouver market peaked in spring 2011 (spring 2012 was a seasonal bounce).
The average Canada 5 year bond rate was about 2.55% in the first half of 2011 (Source: Bloomberg)
For the first 6 months of 2013 the 5 year rate averaged 1.40% so about 115 basis points lower.
If you buy into the MLS benchmark, the average home in Vancouver is about $600k right now. In 2011 HPI peaked at $612,600, so we’re down roughly 2 percent, despite materially lower mortgage rates.
Lets make some assumptions about the average home buyer in Vancouver using the MLS benchmark of $600,000
The average buyer this spring had $100k to put down and took out a $500k mortgage at 2.80%
We know these rate-lock zombies only really care about the payment which is $2315.22 using the above assumptions.
Add 110 basis points and the same payment covers a purchase of $544,500 (still assuming 100k down) so that would be about 11% lower than the 2011 benchmark price.
If you plug in a 3.5% Canada 5 year yield as you’ve rightly pointed is basically historically normal (although yields were lower 3 years ago) the same payment only buys a property worth $502,000 which is 18% below the 2011 peak.
A market that has been going down despite materially lower rates is a bad signal for prices, shows that it had dramatically over reached in the first place.
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September 5th, 2013 at 9:57 am 114
In 3 months people renewing will be paying higher rates.
Anyone having less than about 6 months remaining on their term will start to worry.
Do we break the agreement and pay the penalty?
Do we take our chances that rates will not rise more?
Where will we get the extra money to pay for higher mtge payments?
I just lost my job. Will the bank give me trouble at renewal?
Oh, the joys of owership!!
Hot debate. What do you think?
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September 5th, 2013 at 10:17 am 115
Michael Levy (on Bill Good) is predicting that Flaherty will step in and tighten mortgage rules even more.
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September 5th, 2013 at 10:30 am 116
“Michael Levy (on Bill Good) is predicting that Flaherty will step in and tighten mortgage rules even more.”
If the current bear market in bonds continues I doubt it very much, the higher rates will force prices down and F won’t have to take the rap for it.
Hot debate. What do you think?
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September 5th, 2013 at 10:41 am 117
Good article on the coming Depreciation Reports:
http://issuu.com/rew1/docs/ri-sep6
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September 5th, 2013 at 12:24 pm 118
Who’s Michael Levy? Oh right… the guy on CKNW. Click.
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September 5th, 2013 at 12:29 pm 119
“3 months from now people renewing from 5 years ago will be paying HIGHER rates”
Only if rates go up another 1% in short order. The big shift in the “renewal gap” starts coming in early 2014. (Rates didn’t start falling significantly until early 2009.)
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September 5th, 2013 at 12:30 pm 120
Joo.
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September 5th, 2013 at 12:45 pm 121
http://beta.realtor.ca/propertyDetails.aspx?PropertyId=13585176
Floor plan, Land Survey & passing Feng Shui report available
——————————–
Can anyone care to explain what passing a feng shui report will do to the house price ?
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September 5th, 2013 at 12:46 pm 122
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September 5th, 2013 at 12:46 pm 123
Jesse, according to BOC’s website the 5 year bond on this date in 2008 was 3.00%.
By December 30, 2008 it had fallen to 1.67%.
We are at 2.15% today.
Hot debate. What do you think?
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September 5th, 2013 at 12:49 pm 124
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September 5th, 2013 at 12:53 pm 125
“Can anyone care to explain what passing a feng shui report will do to the house price ?”
When combined with 8′s in the address and a distance of at least 3 kms from the nearest hospice, this can raise the price at least 20% over assessed value.
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September 5th, 2013 at 1:04 pm 126
1)Arrest warrants issued for Downtown Eastside landlord
http://www.cbc.ca/news/canada/british-columbia/story/2013/09/04/bc-george-wolsey-landlord-pivot.html
2)$40M meth lab bust one of largest in Ontario history guess where all the money been going to RE
http://www.cbc.ca/news/canada/toronto/story/2013/09/05/toronto-meth-seizure.html
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September 5th, 2013 at 3:21 pm 127
but if your not 3 kilometers from a hospice you need one of those hexagonal mirrors above your door, and its good luck to urinate in garbage cans
Hot debate. What do you think?
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September 5th, 2013 at 3:24 pm 128
@ Meth
Totally agree. The activity profile of YTD 2013 is just like a delayed reaction to the trough in 5 year rates that occurred in April / May before the rates started spiking.
Now that the 5 year has tacked on +100 bps, it will be almost impossible for buyers to approach the same “budget” as they have had at any time in the past 2 years if they have been less than 20% DP buyers. Sellers aren’t going to volunteer prices 15-25% lower to accommodate reduced loan approvals…so there is going to be a standoff and inventories will rise through the fall
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September 5th, 2013 at 3:37 pm 129
For those of us wondering how changing credit conditions and the collective attitude towards debt affects behavior, look to an example that’s slightly less near and dear to our hearts than Vancouver real estate: auto loans.
Auto dealers report record August sales:
Hooray! This must mean wonderful things for the economy. High fives all around.
Canadians’ auto-buying bonanza raises flags:
This matches what I’ve seen anecdotally. Financing a car for 6 years is the same kind of idiocy as a 40-year mortgage.
At least in the case of auto financing the dealer isn’t securitizing and offloading delinquency risk — though I suppose you could make some kind of parallel with the auto-industry bailouts of a few years ago.
Lesson learned: the average person is a complete idiot when it comes to debt. (That counts double in BC.)
Hot debate. What do you think?
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September 5th, 2013 at 3:41 pm 130
Let’s not get too excited about the surge in listings in early September–it is at totally normal September surge levels.
Here is 2012: date sell list ratio
04-Sep 88 364 24.2%
05-Sep 69 327 21.1%
06-Sep 80 290 27.6%
07-Sep 54 295 18.3%
Here is 2011:
06-Sep 103 356 28.9%
07-Sep 106 316 33.5%
08-Sep 103 277 37.2%
09-Sep 106 253 41.9%
Here is 2010:
30-Aug 102 191 53.4%
31-Aug 129 150 86.0%
01-Sep 94 189 49.7%
02-Sep 106 190 55.8%
03-Sep 103 210 49.0%
So far, 2013 looks like 2011 or 2012 for listings. If we get a 400 listings day, or sustained 300+ then we have something. Otherwise, same old September.
I think the rate-hold thing is the best explanatory factor for the last few months.
If current yield trends sustain, then that 5-yr renewal gap turning positive will start to be a big story.
When is last time 5-yr renewal gap was positive? Does the average person under 50 even remember that kind of stress? It is *hugely* stressful, and a positive renewal gap would have a big impact on water-cooler chat, I think.
Hot debate. What do you think?
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September 5th, 2013 at 4:01 pm 131
Here is a chart of the 5 year renewal gap from 1956 to 2013.
There was a small blip positive in 2008, but the gap hasn’t been above 2 since 1990.
Basically, pretty much no one under 50 knows the stress of waiting to hear from your bank how much your 5-year mortgage payment is going to go *up*.
Anyone here remember that stress? If we see renewal gaps turn positive in 2014, a new generation will learn that burn. And it does burn.
Hot debate. What do you think?
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September 5th, 2013 at 4:01 pm 132
Am I just afraid of change or is the new MLS site horrible?
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September 5th, 2013 at 4:09 pm 133
“For those of us wondering how changing credit conditions and the collective attitude towards debt affects behavior, look to an example that’s slightly less near and dear to our hearts than Vancouver real estate: auto loans.”
Or just look at Google trends http://www.google.com/trends/explore?q=rising+mortgage+rates+#q=%22mortgage%20rates%20canada%22&geo=CA&cmpt=q
It makes no difference whether sales comes in spurts or incrementally, either way, effective demand is still declining and will pay it back with lower sales in Q4 to Q1.
So it’s another Thanksgiving, Christmas and New Years with the sounds of crickets for realtors.
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September 5th, 2013 at 4:13 pm 134
Congratulations Vancouver. According to Bloomberg News/National Post you are now one of the two largest cities in Canada. Not sure what happened to Montreal but whatever.
It’s bad enough that these “news” outlets simply rehash RE propaganda as news, they can’t even get basic facts right. And they want you to pay for this garbage?
“Home sales in Canada’s two largest cities continued their surge in August from a year earlier.”
http://business.financialpost.com/2013/09/05/canadas-two-largest-real-estate-markets-are-surging/
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September 5th, 2013 at 4:29 pm 135
@Many Franks.
Great articles.
I have seen first hand the idiocy of “buying the payment| type of purchases. Friend of mine “bought” last month 2 year old SUV. And that after we have been talking about importance of saving. I was floored when he told me. What is funny is that he told me that he actually was very prudent with purchase because he managed to have monthly payment not to exceed $350. I said ” so you put big down payment” he said: “Nop, just increased the term of the contract to 7 years” I said WOW, and added sarcastically that he could be even more frugal if he could increase the term to 10 year. But he does not get it. This consumerism is like using heavy drugs. He is totally hypnotized. By the time he trades this vehicle in 4-5 years he will own more on the loan then the vehicle is worth it. and what is the sad thing is that he does not need this SUV. He had perfectly good sedan, paid off.
But then excuses started: hey this one has 7 seats! I said wtf you are not going to have more babies. you are 45 and done. But then he said “hey i could always pick somebody from the airport with the luggage”. But nobody visit you anyway. and even if something like this happened you could always get a cab. It is impossible to rationalize.
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September 5th, 2013 at 4:43 pm 136
@Saver: I have a friend who recently went from a not-too-old sedan to a brand new crossover. The motivation was trying to avoid a $2-3k repair bill on his old car in favour of trade-in credit from the dealership (surprise, the same shop that gave him the $2-3k repair estimate).
He’ll be paying more than double the ticket price of the vehicle when all is said and done, in addition to getting ripped off on the trade-in.
And he’s over the moon with his new car. Addictive behavior indeed. This guy is no dummy, but after hearing this story, you’d be forgiven for arguing otherwise.
(This guy’s in his 30s, otherwise I’d say we had the same buddy.)
Hot debate. What do you think?
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September 5th, 2013 at 5:56 pm 137
Speaking of car payments, when did they start doing 84 month terms and show the payments as bi-weekly?
Also, will this trend eventually go to a 40 year car loan and the payment amount shown as daily?
Hot debate. What do you think?
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September 5th, 2013 at 6:00 pm 138
VHB:
That’s a great chart that you dug up. Very informative.
Do you see the early 80′s and the early 90′s spikes above ZERO??….did these lead to the sharp corrections historically?
I have been looking at this exact metric in predicting when household financing will be stressed. Looking at yields 4-5 years ago implies that this chart will go above ZERO in about 8 months time.
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September 5th, 2013 at 6:03 pm 139
New Listings 280
Price Changes 98
Sold Listings 118
TI:16912
http://www.paulboenisch.com
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September 5th, 2013 at 6:11 pm 140
+100 to inventory.
+73 yesterday.
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September 5th, 2013 at 6:12 pm 141
This is what auto loans, debt consolations and other non-mortgage or revolving credit looks like for Canada. http://i.cubeupload.com/g5djGA.png
That ain’t no IFRS change either.
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September 5th, 2013 at 6:16 pm 142
we’ll be at 18,000+ listings shortly.
MOI will scoot up past ten by late fall.
it’s fucked, waiting will pay off, shitstorm in the coming year.
suck wine.
Hot debate. What do you think?
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September 5th, 2013 at 6:36 pm 143
Laptops are already advertising to finance daily
http://www.mdg.ca/finance/laptops.aspx
i am guessing cars will follow in year or two. i have noticed bi-weekly ads for cars about a year ago. this world is going crazy.
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September 5th, 2013 at 6:39 pm 144
Bpom, the 5y bond rate leads mortgage rates. Going off the “average” rate the differential goes to zero in May 2014 and is negative for the rest of 2013 at current interest rates.
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September 5th, 2013 at 7:42 pm 145
The US non-farm payroll tomorrow 5:30am is The stat to watch.
If it’s a good beat, then chance of Sep-taper will be much higher (and bond yield will soar further)
The Canadian Unemployement Rate and Ivey PMI tomorrow will be interesting to watch too. All major stats that can impact CAD/USD exchange rate..
Hot debate. What do you think?
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September 5th, 2013 at 8:02 pm 146
My god, it’s so beautiful.
/wipes away tears
Now, every morning is like Christmas.
http://www.greaterfool.ca/wp-content/uploads/2013/09/BONDS.png?8f4c78
*sniff*
Hot debate. What do you think?
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September 5th, 2013 at 8:57 pm 147
Scotiabank’s Rick Waugh is doing a nice bit of comedy aimed directly at Jim Flaherty.
Bank of Canada should hike rates if worried about housing: Scotiabank
Reminds me of Robert Webb in this sketch.
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September 5th, 2013 at 9:44 pm 148
G&M on a roll today
Mortgage fears drive up Canadian home sales
If rising rates don’t cool housing, Flaherty may have to
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September 5th, 2013 at 9:52 pm 149
Time for some reflection:
Back in June, RBC raised its 5Y Special Fixed Rate from 3.09% to 3.19% on June 10, then 3.39% on June 24 (now at 3.89%).
With Fixed Rate on the upswing since early/mid June, the 90-day low-rate holds are starting to expire right about now. The 120-day low-rate holds may still have a month left before they expire. Worth noting that banks also do “rate sales”, with a lower rate quote requiring a faster closing (<60 days).
Now for my little spiel:
The rising rates have been forcing potential home-buyers who were sitting on the fence to make a major financial decision within 90-120 days. 3-4 months is enough time for any fence-sitter with a buying-bias to capitulate. This has occurred, resulting in an unseasonably "hot" July, August, and early September.
Contrast this year's 3-4 month "grace period" with previous RE-tightening events:
- 2012 July's CMHC mortgage rule change had 19 days of advance-warning.
- Previous 2 CMHC mortgage rule changes in 2010-11 had 2 months of advance-warning.
*Note that CMHC rule changes, upon implementation, overrides existing mortgage-preapprovals.
In 2013, where the 1% rate hike over 3 months was obviously also a "RE-tightening event", the fence-sitters have 3-4 months to capitulate, after they get pre-approved with lower rates in May/June.
Due to the longer duration of "grace period," I expect the "Drawn-Forward-Demand" phenomenon to be more pronounced than previous RE-tightening events. I also expect the "Demand-Depletion-Following-Tightening" phenomenon to be more pronounced as well, taking place as early as mid/late September, exacerbating in Fall/Winter.
Hot debate. What do you think?
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September 5th, 2013 at 10:36 pm 150
VMD, as I mentioned on twitter, changing amortizations are different from rising real rates. Changing amortization should have very little effect on the NPV calculations because it only affects repayment. Rising real rates OTOH is a different beast: they in effect tax borrowers and should elicit a stronger reaction.
The talk when amortizations were clawed back was on the “effective” rise in rates of 1% or whatever, but while that increases payments it also increases savings so nothing is really lost. Rising rates is bona fide “throwing your money away”. I think in general borrowers know the difference.
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September 5th, 2013 at 10:41 pm 151
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September 5th, 2013 at 11:07 pm 152
RealityCheck, with no sense of irony says, “nothing earth shattering to happen anytime soon. Too many new foreigners buying. 100,000′s of Immigrants will pour into this city over the next 3-5 years.”
So…. the LM gets ALL of Canada’s immigrants? I did a quick “reality check” of my own over at Wikipedia. Your immigration numbers are wrong – very wrong. (“Since 2001, immigration has ranged between 221,352 and 262,236″)
For your hyperbole above to be true, most of the immigrants need to settle in the Couv. Simply doesn’t happen.
It’s OK though, those who fear a crash need to bend reality to come to the conclusions they like.
Hot debate. What do you think?
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September 8th, 2013 at 3:16 pm 153
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