Vancouver Condo Info

Jonathon sent in a link to this great ‘blast from the past’ interview with developer Sam Zell about whether there was a real estate bubble in Miami.  He makes some very compelling arguments about why there is no real estate bubble, and some of them sound remarkably familiar somehow.

Q But U.S. home prices are up about 40% in three years. How can this not be a bubble?

A Econ 1001: Prices have gone up because the demand has been much greater than the supply. The country is producing all it can in terms of supply, but what you see is more demand. Over the next 10 years we’re going to add a million new household, much of that’s due to immigration.

Econ 1001 is very advanced, so you may not understand that.  Here’s something you will understand:

Q How bad could it get?

A Worst-case scenario? A flat housing market. Look, all I can tell you is we’re the largest owner of apartments in the U.S. and among the largest converters of apartments to condos. If there was a danger of a bubble, would we be in this business? I’ve never been accused of being a Pollyanna, I’m the Gravedancer. Americans don’t understand that we have the cheapest housing in the world. London and Tokyo are more expensive than New York. Why do you think everyone is going to South Florida from Europe? It’s because prices here are cheap compared with there.

Understand?  South Florida is cheaper than other places, and everyone wants to live there.  Ergo, there is no housing bubble in Miami condos.  All of those arguments just happen to be applicable to Vancouver BC as well.

Here’s the ‘flat market’ in Miami since that argument was made, but always remember: ‘it’s different here’.

YLTNBoomerang just sent in an update of their Downtown Townhouse listings graph:

Like most other market segments we’ve hopped up close to the high number of listing we saw sitting on the market in 2008, though inventory growth has moderated lately.  YLTNBoomerang attached the following note:

I’ve had some time to update my tracking sheets for townhouses downtown this week and thought you might be interested in the attached graph.  Basically, this is a plot of the number of townhouses downtown that are listed on a daily basis – well it started out as a daily basis in 2008 then slowed down to bi-weekly updates in 2010 as I was working out of town and didn’t have time.  I’m back to weekly updates now…

We may be running out of land, but we sure aren’t running out of apartments for sale.  Just in case you haven’t noticed, VHB has been tracking downtown / False Creek North condo inventory in the forum and we’re seeing quite a number of places for sale there:

This one is for all the data hounds out there. The VCI Condo Unit Listing Tracker (CULT) index is a snapshot of inventory available at a few select downtown Vancouver condo towers. The widget you see at the upper right hand corner of this page shows the overall number of units and percentage of total that are available in the index.

At time of posting on Monday evening there are 568 units available for sale in the 27 towers that comprise the index. This is 6.66% of the total number of units in those towers, down from 6.79% last week. You can click on the widget at any time to visit the detailed breakdown page at http://vancouvercondo.info/cult-index.

The 27 towers in the index are: Brava, Carina, Cascina, Conference Plaza, Elan, Erickson, Espana, Fairmont, Flagship, H+H, Hudson, Koret, Lions Towers, Melville, Pinnacle, Qube, Ritz, Sapphire, Shangri-la, Smart, Space, Spectrum, The Park, TV Towers, Vita, Woodwards Towers and Yaletown Park towers. The current leader in percentage of units available for sale is The Erickson with 14 of 61 units or 22.95% available for sale.

This index was built and generously donated to the VCI community by c0der, the same programmer who gave us the comment rating system used on this site. c0der is a Systems Architect who works with Linux, Security, Oracle Fusion and PHP/MySQL technology stacks. If you have a project you’d like him to consult or program for you can email him directly: coder@vancouvercondo.info.

Vibe posted an interesting comparison of the 2006 US bubble peak to the present day Canadian situation in the forums this weekend.  The local Vancouver market is bubblicious, but is there a national Canadian housing bubble?

Everyone pretty much agrees about Vancouver, but here are a couple of points that were made about the national scene:

1.It is reasonable to claim that there is not a housing bubble in Canada because only certain areas are over inflated.

2.Vancouver’s very high prices skew the national average and cause Canada to look worse than it really is.

One thing I think we can all agree on is that the US did have a housing bubble. Well I put together a spreadsheet that I feel shows that affordability is about as bad across Canada as it was in the US at their peak. It also shows that Vancouver is not skewing our national data any more than the most overpriced cities in the US were skewing their data.

In order to measure affordability I used house price to personal income ratios. I compared the 20 cities used in the Case Shiller Housing Index to the 6 cities used in the Teranet Housing Index. The US data is from 2006 while the Canadian data is from 2009.

I think the following graph most clearly illustrates my point:

Vancouver is the only Canadian city with a ratio over 9, while the US had 3: LA, San Fran and San Diego. Toronto is the only Canadian city with a ratio between 5 and 9, the US had 9 in this range. The under 5 range looks bigger for Canada but we have more population covered by our index than they do by theirs. The important thing is that the percentage of each nations population living in cities with elevated ratios is similar.

The distribution and average ratios for both countries are almost identical. I did a population weighted average of the ratios and this gave a higher value for the US than Canada, 6.3 versus 5.6. Keeping in mind that the Canadian data comes from 3rd quarter 2009, during our recent price dip, I don’t think this is a huge difference.

Now I don’t know what the future holds, but to me this data suggest we are in a very similar situation to the US at their peak. We might not take the same path down (we already had a double top) but I don’t see why our eventual bottom should be much, if any, higher than theirs. And any price drops should be distributed across the nation in a similar fashion as well.

Here is a link to the data for anyone interested.

If listings were floors in a building Spectrum would be the tallest building in Downtown Vancouver. This infographic shows an imaginary skyline based on number of units for sale in a few of the new buildings downtown based on Supersogs post from Monday.

Lots of properties out there for sale, not just in the downtown core.  Listings for the entire REBGV region have been accelerating lately a lot faster than they did in previous spring markets.  We’re close to adding 1000 new listings a week.  Even the spring before the 2009 market dip didn’t see listing rise this fast.  As of last night the inventory count was at 16,741.

Laadies aaand Gentlemen! Step right up, one and all and ride the bubbliest market in North Americaa!. The Great Vancouver Real Estate Roller Coaster is now open for bizness! Experience the thrills! The Spills! The mind-boggling economic waste of it all!

Front row seats for you only my friend, here’s your tickets:

REBGV Inventory chart created by vibe in the VCI forum.

Wow, it was just six days ago that we had a 15k party in the forum to welcome the fifteen-thousandth property available for sale in the REBGV area, and now I see that we’re already closing in on 16,000 listings.

We’ve got two regular posters here who have been providing regular updates so data addicts can watch the listings grow through the day, let’s hear it for paulb and inventory!  As of the end of Wednesday listings sat at 15,789.

At this rate there’s a possibility that we’ll add more than 2000 listings in the month of April, despite a healthy number of sales.  We’ve already surpassed the supply available at this point in the last five years.  The only year that listings growth looked anything like this was during the micro-crash of 2008 where prices bottomed out at a 10-15% loss and have since recovered.

It looks like many people think that right now is a good time to cash in that million-dollar property.  Please no pushing or shoving, we are civilized people.  Head to the exits in an orderly manner, there are plenty of lifeboats for everyone.

The REBGV December 2009 stats are out and the average Vancouver House price has reached a mind-boggling $952,927 despite less than peak population growth rates.

Don sent in the information above – this chart shows Vancouver average house prices from 1977 to 2009 superimposed on a graph of the BC population growth in percent from BC Stats.  The $300k price point correlates to 3% population growth.

One thing to keep in mind is that some divergence is only natural: one percent population growth in 2009 represents more people than 1% in 1977 because we’re starting with a larger base population.  It’s still interesting to see the correlation between population growth and house prices.  There was actually very high population growth in the late 70s and early 90s that relates to those housing booms.  By the middle of the 90s this growth had real house prices nearly back up to what they were in 1981,

You can see the correlation between the housing market decline in the mid nineties and the drop in population growth.  We’ve never recovered that high rate of population growth (as high as 3% in the mid nineties).  We seem to have peaked at 1.7% in 2008.  It will be interesting to see what BC and Vancouver population growth does going forward – will ‘everyone want to live here’ or will we see a a decline in population growth with fewer infrastructure project jobs and less construction?

Canadian Mortgage Trends has an interesting interview with Pierre Serre, the Vice President of Insurance Products and Business Development at CMHC.  The upshot of the interview is that the CMHC has plenty of dough in reserve and poses no threat to the Canadian taxpayer in the event of a housing market crash.  There are some other interesting figures in that interview: currently 9% of Canadian mortgage holders have less than 10% equity in their home.  They also remark on default rates during previous rate increase periods, which seems topical since Carney is planning on raising the benchmark rate by 500% in 2010 (from a rock bottom .25% to a still low 1.5%)

CMT: Can you tell us, what were default rates in past periods of large rate increases (like 1980-81 or 88-89)?

Pierre: According to the Canadian Bankers Association, the highest rate of mortgage arrears—which is, greater than 90 days–occurred in 1982 and in 1983. The rates were 0.96% and 1.02% respectively, compared to today’s rate of 0.43%.

CMT: Mortgage arrears are currently around 0.4% in Canada—exceptionally low, especially for a recession. I assume CMHC’s risk analysts have calculated what would happen in a worst-case scenario of mass defaults?

Pierre: CMHC internal analysis supports CMHC being able to cope with a variety of economic scenarios, including some rather severe ones.

By ‘rather severe ones’ I assume he means a US-style cliff diving real estate market.  Speaking of cliff-diving and on a whole different topic, check out this graph of US commercial real estate.

Thanks to Don for the links!