Archive for the ‘BC’ Category

Builders stop building in a bubble?

Thursday, November 20th, 2014

Markoz left this comment in yesterdays thread, but it got held up in moderation because it had more than two links:

My wife works at a bank and her boss sent a link to this BIV article entitled, “Nobel economist housing bubble formula shows Vancouver resistant.

Here is a copy of my response (unfortunately the charts I clipped won’t paste into the comment section):
His theory (as presented by the article’s writer at least) is that builders are smart enough to stop building before/when a bubble pops. I’m not sure if he means that a slow down in building is a precursor to a bubble popping or if he means that when sales drop so do housing starts. In Vancouver, housing starts only dropped off significantly well after sales did in 2008.

Vancouver sales began to tank in March or April of 2008.

Residential property sales in Greater Vancouver totalled 2,997 in March 2008, a decline of 16.3 per cent from the 3,582 residential sales recorded in March 2007, and a decline of 25.7 per cent compared to the 4,033 sales in March 2006.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver totalled 3,218 in April 2008, a decline of five per cent from the 3,387 sales recorded in April 2007, and a 3.8 per cent drop from the 3,345 sales in April 2006.

VANCOUVER – The Greater Vancouver housing market continued its re-balance between sales and listings last month. The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver declined 30.7 per cent in May 2008 to 3,002 from the 4,331 sales recorded in May 2007.
All of the above is from the REGBV website: http://www.rebgv.org/monthly-reports?month=May&year=2008
It just kept getting worse:http://www.huffingtonpost.ca/2012/07/04/vancouver-home-sales-10-year-low_n_1649539.html

“This summer, sales went off a cliff,” added Somerville, who is director of the centre for urban economics and real estate at the Sauder School of Business at the University of B.C.:http://www.canada.com/vancouversun/news/business/story.html?id=e6e0c211-fddd-413b-9a94-3564e20567d8

The financial crisis did not start until Lehman Bros failed on September 15, 2008.

Here are the housing starts specs:

Apparently our builders aren’t as smart as the Nobel Laureate. Starts for all types of homes stayed above the average for 2004-2008 till the end of 2008. They plummeted after the fact. Perhaps the writer is putting his own spin on what Smith said. I wasn’t there so I don’t know.

The other thing to note is that the writer never actually asked Smith if he thought Vancouver was in a bubble. He did a follow up interview with him but seems to have avoided asking the question directly. He says, “Using Smith’s formula for housing bubble-burst scenarios, B.C. and Vancouver do not appear threatened, despite record-high prices in the latter. B.C. housing starts this year are up 3.1% from 2013 and forecast to rise a further 1.4% in 2015, according to Canada Mortgage and Housing Corp.” Why not just ask him what he thought instead of making a supposition?

BC Ferries: Losing money by cutting service

Wednesday, November 19th, 2014

Think of the money the government could save by closing down the Trans Canada highway! No more expensive road maintenance, and the land could be sold off to build more condos!

…Of course there may be some negatives associated with closing that highway.

Here on the coast much of our province is across water, which means the transportation system we rely on is BC Ferries.

An economic analysis shows that the expected $725k savings from recent cuts is actually causing a loss of $870k in tax revenues as tourism plunges $3.9 million following deep service cuts.

About one in five tourism- ism-based businesses in the Coast-Chilcotin region report foreclosure is a near-term possibility.

More than 40 per cent report losing most or all of their tourist bookings when agencies couldn’t sell the Discovery Coast package due to worries over ferry service.

And three in four businesses report decreased income in the year after the service cuts, according to the report by Larose Research Strategy.

Read the full article here.

Vancouver Housing Myths

Wednesday, November 12th, 2014

Crabman pointed out this article in BIV: Conference torpedoes Vancouver housing myths

Metro Vancouver housing is affordable. The market is stable. There is no glut of new condominiums looming. And foreign investors are not driving sales and prices higher.

I believe those are not the myths being exploded, but meant to be statements of fact at the beginning of the article. As for the ‘affordability’ issue, the cities top condo salesman says simply omit SFH and disregard the top 20% of the market and things don’t look so bad.

Rennie said media and pundits concentrate on the average price of single-family detached houses in the City of Vancouver, which consistently average in the million- dollar range, with condominiums north of $440,000. But, he said, such higher-end sales represent only 20% of the overall market.

For the remaining 80% of buyers, the average detached house is around $670,000 and the average condominium is $316,000, Rennie said.

But there seems to be some question about how that math works out. Crabman claims to have done the math and come up with a different result:

There are also 383 houses listed over $670k in East Van. When I removed the most expensive 20% of listings, the median price of the bottom 80% was $1,088,000.

And on the west side, the median price for the “cheaper” 80% of listings was $2,888,888.

But even if Crabman is mistaken and Rennie has the math correct, there’s this:

Of course, once you also exclude the top 20% of incomes, $670,000 is anything but affordable.

 

 

Oct 2014 Vancouver Realtor Hunger Index at 54%

Wednesday, November 5th, 2014

RFM has updated the Vancouver Realtor Hunger Index which currently stands at 54%.

That takes it almost squarely into the middle of historical data:

The VANCOUVER REALTOR HUNGER INDEX for October 2014 was 54%. How does this compare? The 17-year average for October is 50%. At 54%, the 2014 October VRHI was higher than 8 years and lower than 8 years since 1998.

Details and comparison data for 17 years at: http://vancouverpeak.com/showthread.php?tid=64

Here’s how that number is calculated:

I start with the total reported sales from the REBGV. I assume 5% of those sales were ‘double ended’ (one realtor kept the entire commission by ‘representing’ both buyer and seller) and add to the number of ‘double ended’ commissions the number of split commissions (which I reduce by an assumed 15% ‘earned’ by realtors who handled multiple sales). I divide the resulting number of commissions by the total number of realtors and subtract that fraction from 1 to yield the percent of realtors not earning commissions and therefore going hungry. In symbols: (((sales x .05) + (sales x 1.615))/(# realtors)) – 1 = VRHI; (1.615 = .95 x 2 x .85). The REBGV website reveals neither the exact number of realtors at any particular time nor the percent actively engaged in selling residential property. I used 11,000 for 2014, 2013, 2012 and 2011; 10,000 for 2010, 9,400 for 2009, 9,500 for 2008, 9,000 for 2007, 8,200 for 2006, 7,800 for 2005, 7,100 for 2004, 6,700 for 2003, 6,500 for 2002, 6,700 for 2001, 7,200 for 2000, 7,800 for 1999 and 8,500 for 1998.

CMHC: Lower house sales in lower mainland over next 2 years

Monday, November 3rd, 2014

The CMHC is predicting declining house sales in the lower mainland over the next couple of years due to higher mortgage interest rates.

“Total housing starts will edge higher as resale market conditions remain balanced and the supply of completed and unabsorbed (unsold) new homes trends lower,” said CMHC B.C. regional economist Carol Frketich.

“Housing demand will be supported by employment and population growth, but tempered by gradually rising mortgage interest rates.”

They are predicting price growth of 1.2 and 1.7% (unclear if this is before or after inflation) and they forecast this based on an assumption of a shift to ‘lower cost housing’.

Which might be good news for anyone trying to sell ‘lower cost housing’ since prices on Vancouver homes under $1.1 million have gone essentially nowhere over the last four years.

 

Is Vancouver lost without a Compass?

Thursday, October 30th, 2014

In Vancouver everything is about real estate.

Yes, EVERYTHING.

Even that bus you take to get to your weed dispensary before yoga class.

Thats why it’s so disappointing that our world class fare gates are still not working.  This is the system that was supposed to be ready in 2008 but has been delayed over and over again. It’s a $194 million dollar solution that isn’t quite a solution yet.

Once in place this system should put a stop to fare evasion which is currently estimated to be a loss of at least $10 million per year. Well, hopefully it’s at least $10 mil per year, since we’ll be paying $12 million per year for operating costs once the system is working.

Fortunately this is all happening in Vancouver which means whether the transit system is losing money in fare evasion or through operating costs it can always make that money back in real estate.

What’s plan B for the economy?

Monday, October 27th, 2014

BC really hasn’t done so bad for itself by digging stuff up from the ground and selling it to other countries, but as prices change in that market it can leave our economy somewhat wanting.

For example:

This week, we discovered just how far the B.C. government was prepared to cave in order to assuage proponents like Petronas. It effectively cut the royalty tax it first talked about in half.

Now ‘free money’ is still free money, but anytime your income is cut in half its a bit of a downer.

So whats plan B to diversify the BC economy?  Gary Mason says there is no plan B and Patriotz says ‘what about real estate‘? But isn’t the RE market a bit played out at this point?

Most middle class RE purchases in Vancouver have gained less than a GIC over the last four years, and there’s the risk that high home prices chase away more productive industries.

So how does BC grow its economy in the future? If resources take a dive, what our best hope as a province to compete on a national and global scale?

Evangelists for buying

Monday, October 20th, 2014

Many Franks pointed out this article in the Globe and Mail and then pulled out a whole bunch of gems.

“Here’s a hilarious litany of Vancouver real estate orthodoxy straight from the punch bowl:”

…the city renowned in popular mythology as a place with such astronomical house prices that its young will be forced to live in basement suites forever…“

That’s right, buy or basement suites forever, your choice.

…There’s definitely sacrifices. I budgeted. I didn’t eat out. Some could say I missed some life experiences. But if you have that [home ownership] as your goal, anything is possible…”

It’s amazing whats possible if you just skip life experiences.

…the proliferation of condos and townhouses here gives them a lower-priced product to choose from compared with other cities that are dominated by houses…

Not only a magical city, but also one of the only ones around that has condos and townhouses!

…siblings or friends will buy an apartment together until they’ve built up enough equity to sell and take their proceeds…

Because what could go wrong with that?

…they’ve decided they’re going to buy in, no matter what…

NO MATTER WHAT!!

…buying became an emotional decision about moving to a new life phase. “This was the first step of being an adult,” said Mr. Richard…

Emotional decisions are an important first step of being an adult.

…some young homeowners have become slightly evangelical about the need for others to realize it’s possible if they stop being so clueless about money…

All it takes is a little knowledge.

“They don’t know anyone who owns, they don’t understand money, they just don’t think it’s possible. I keep telling them: “It’s a conspiracy to keep you as renters. Then you can pay someone else’s mortgage.’”

As Many Franks says “Amazing how much paydirt you can pack into a single article.”

 

Moving up in Vancouver Real Estate? Not so much…

Wednesday, October 15th, 2014

CIBC World Markets has released research that looks behind the average price moves in Canadian real estate. How are prices moving in Vancouver?

Astonishingly enough it looks like properties under the $1.1 million mark have moved less than a GIC in the last four years.  Here’s a graph from the original PDF:

Screen Shot 2014-10-15 at 2.50.16 PM

 

That boggles the mind. Even Toronto which has prices going up at the high end looks like its been a much better investment at the lower and middle end:

Screen Shot 2014-10-14 at 2.38.45 PM

 

So essentially that idea you have in your mind that Vancouver real estate has been a good investment over the last four years with prices just rising and rising? Not so much.

Prices up, incomes down

Monday, October 6th, 2014

Pete McMartin is on a roll over at the Vancouver Sun with a series of articles that looks at actual data on the Vancouver economy and housing.

The most recent article looks at local income levels.

Vancouver stands out as an unusual case around North America: Our house prices rose as our incomes fell.

But those high house prices, and our utter preoccupation with them, have become a distraction to a greater problem, and they are only a part of Vancouver’s economic malady. At any rate, those high housing prices are largely beyond the jurisdictional abilities of Metro Vancouver’s municipal governments to have any real effect on them. Meaningful change — in immigration numbers, for example — would reside with the federal and provincial governments, but not at the municipal level.

No, the persistent, year-over-year problem has been in income decline, and this has been a long time coming.

“This is not a new story,” said Tsur Somerville, director of the University of B.C. school of urban economics and real estate. “We have lagged behind the other major metropolitan cities since the 1980s, and even before the period of rising home prices.”

Read the full article here.

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