Vancouver Condo Info

You know how everyone wants to live in Vancouver right?  Well apparently not so many of them are achieving that dream.  Crabman posted these numbers in a comment last week putting our population growth in perspective when compared to a few other North American cities.  That’s us over on the right in the graph above, with a measly 6.5% population growth over five years. The numbers come from Statistics Canada and the US Census Bureau.

Now what you’d expect with rapid population growth is higher prices for real estate, while anemic growth should result in slower appreciation.  A couple of the quickest growing cities in this list are notable for their rapid rise in home prices: Las Vegas & Phoenix Arizona.  Both cities saw a big run-up in prices until just a couple of years ago.  As most of you know, prices in those cities have since corrected by as much as 50% despite their real population growth.

So what’s happening in Vancouver? We clearly haven’t had a tremendous increase in population compared to other North American cities, so what keeps the cost of our homes so high?  Is the rain dissolving our buildings faster than we can construct them, thus keeping supply low?  Are we just a whole lot richer than other cities or are we drunk on rampant speculation and easy credit?

This should be fairly self-explanatory, I’ve graphed data from BC Stats comparing the increase in local incomes to the run-up in house prices from 2000 to 2007.  Why only up to 2007?  Because that’s the last year I can find local income statistics from Revenue Canada.

The house price data comes from the house sales PDF link at the bottom of this page at BC Stats, while the neighborhood income statistics come from this page, and are available as a PDF or CSV.  If anyone can find any other interesting data in that haystack I’d be happy to post it here to share with the VCI community.

So how about that growing gap between incomes and house prices?  Can house prices grow that much faster than incomes indefinitely?  We’ve already seen how well that worked out in the US.

Regular readers will recognize the name Paul Boenisch as the North Vancouver realtor who provided daily market stats on his blog.  As many of you know, Paul and his family moved to to the other coast recently, and he now has a new blog focusing on the Prince Edward Island real estate market.

It’s an interesting contrast to our market- check out the average sales price chart he’s posted that covers the last four years.  They started 2006 with an average residential sales price of $120k, and peaked just above $160k.

There are a lot of quotes in the media these days from local developers and politicians with variations on the theme ‘nobody saw the Vancouver housing bust coming‘.  This is surprising when you consider how many blogs we have out there dedicated to the concept that Vancouver house prices got way out of hand and are in for the mother of all corrections.

But lets not blame the experts too much, perhaps the extent of their research was a Google search for the term ‘Vancouver house prices‘ which yields this reassuring CBC article as the first result: Vancouver house prices expected to rise 9 percent in 2008.  If you’re expecting a 9 percent increase in house prices, I suppose a 15% drop from market peak could really catch you off guard.

So this is my ‘told you so‘ moment.  Not that the real estate market would see a sharp correction.  Nope, I certainly wasn’t the only one to predict that. Most of the long-time readers here at vancouvercondo.info made the same prediction, as did many other local bloggers, so that’s no unique feat.  I do believe however, that I was the only one to correctly call the Vancouver Bubble Blog Bubble at the beginning of 2007.  Here’s the updated version of that chart along with my count of local bubble blogs:

1. March 2005: Vancouver Housing Blog – the original, closed in Feb 2007
2. Nov 2005: Rob Chipmans – gets a half point for being moderately bearish
3. June 2006: VancouverCondo.Info – Hey that’s us right here!
4. Oct 2006: Vancouver Unrealestate – Looks to be closing down January 2009
5. Dec 2006: BC Housing -Uncertainbuyer closed down end of 2008
6. Jan 2007: Financial Planning and Personal Sanity -now Housing Analysis
7. March 2007: Condohype – Still disowning the lifestyle
8. Dec 2007: North Vancouver Homes – stats and housing market data
9. Feb 2008: Vancouver Real Estate Anecdote Archive – just as the title says
10. Jan 2008: Fishy Real Estate – FishRE closed down the blog in 2008 Q3
11. Feb 2008: Coco News – shared economic news stories, closed 2008 Q3
12. Feb 2008: Vancouver Housing Crash – last post September 2008

Have I missed your favorite Vancouver housing market blog?  Add it to the Wiki!

Well the official stats are out for December 2008.  How did our local Vancouver real estate market fare?  You can probably detect the general direction of Vancouver house prices in the following graph:

The drop was slightly less than November ‘08, falling $18,104 to a benchmark price of $648,421.  So far the benchmark has dropped $122,900 from the market peak last spring.

UPDATE: Bubble lad just posted a link to this story in today’s Sun: Metro Vancouver to see deepest property price dip.

Metro Vancouver’s home prices rose the highest in Canada’s property boom and will fall the furthest in its correction, real estate firm Royal LePage has forecast.  Royal LePage Real Estate Services, in its 2009 market survey forecast released Tuesday, predicted that Metro’s average home price will decline nine per cent in 2009 to $540,100 from a 2008 forecast of $593,500.

That will be almost three times deeper than the national average decline for 2009 of three per cent, which should bring the average home price down to $295,000 nationally.

Royal LePage CEO Phil Soper said that over the long term, home-price appreciation should rise in line with the rate that a city’s incomes rise.  “Over the last seven years, Vancouver prices increased at a rate significantly above the underlying appreciation of people’s incomes,” Soper said in an interview.

Don’t listen to the negativity.  Local incomes are irrelevant.  OUR market is different,it’s fueled by a special blend of upbeat naivety and magic pony-power.

Besides, it’s only money.

Well 2008 has come to a close, and if you’re counting on Vancouver real estate as a ticket to riches it hasn’t been the best of years.  But DO NOT FRET, for I have discovered a simple way for investors to feel a little bit better about the direction house prices took in 2008. Do not look directly at a chart or graph of house prices, instead only view them through a rear view mirror:

There! That’s not quite so bad now is it?

(Yes, we used this same trick when comparing the Vancouver BC / Syndey Australia markets.)

Happy New Year Everyone!

YLTNboomerang sent in this updated snapshot of the townhouse market in Coal Harbour & False Creek North, along with a chart showing days on market vs. sales price reductions. You can download the XLS here and here’s the price change over time chart:

I’ve started a new submarket tracker in the wiki and encourage anyone tracking specific Vancouver sub markets to share their information there. Email me if you add information there and I’ll create a blog post about it.

The benchmark price for a Single Family Home in greater Vancouver is now $666,525. Vancouver West is seeing the biggest drops in detached house and town homes.  Both of those benchmark prices are now down at least 18.5% year over year.  Overall the benchmark house price for Greater Vancouver has dropped $104,725 since May of 2008.  That’s a few free cars worth for those keeping track.  Thanks to cashisking and gadwin for pointing out these numbers.

Post any other interesting things you find in the stats package in the comments section below and I’ll update this post when I get a chance.

From the Vancouver Condo Wiki – Expert Quote-tracker

Pani sent in this link to an International Money Fund research department write-up on falling house prices in advanced economies and their impact on the macroeconomy.  There are some interesting global stats on housing market cycles there:

Between 1970 and 2005, the average house price cycle in advanced countries lasted about ten years, with an expansion phase of six years during which real house prices increased by about 45 percent. During the subsequent four-year contraction phase, real house prices declined about 25 percent, with the range of declines across countries varying from about 10 percent in the United States to over 30 percent in Japan and several European countries.

Of course the question is how much is the current contraction phase like the average?  And housing cycle contractions don’t always occur during recessions or credit market contractions.

Evidence suggests, not surprisingly, that the macroeconomic consequences are more adverse if they occur against the context of a weakening economy and tight credit conditions, which is likely to be the situation facing many countries at present.

Over the period 1960 to the present, recessions in advanced countries that are associated with house price busts and credit crunches are slightly longer and deeper than other recessions. The duration of a recession is more than one quarter longer in the case of a housing bust, total output loss during the recession is somewhat higher, and the unemployment rate increases notably more and for longer in recessions with housing busts.

According to the IMF research, when a housing bust happens during a recession it can double unemployment rates compared to a housing bust that occurs without a recession.