Vancouver Condo Info

This from today’s Globe and Mail - Canadian house prices dropped in June for the first time in nine years:

Canadian home prices fell in June for the first time since January, 1999, as the number of houses for sale remained at record levels.

The average price of an existing home fell 0.4 per cent in June to $341,096, compared with $342,615 the year before, according to statistics released Tuesday by the Canadian Real Estate Association (CREA).

“The fall in home prices…is a sizable dip in this indicator, given that not too long ago the Canadian housing market was witnessing double-digit price gains,” Millan Mulraine, economic strategist at TD Securities Inc., said in a research note.

Of the 25 major markets included in the statistics, average home prices declined on a year-over-year basis in Calgary, Edmonton, Victoria and Windsor-Essex. The largest decline of 2.6 per cent was in Edmonton, while the smallest was in Windsor-Essex at 0.5 per cent.

Last month, BMO Nesbitt Burns Inc. economist Douglas Porter raised the possibility of an overall drop in home prices in Canada. Most industry watchers have stayed with the view that home prices will rise slightly this year.

In June, Mr. Porter said it was “unnerving” to note that Canada’s housing market performance appears to be tracking that of the U.S. but with a two-year lag, although he also sees a number of differences between the two markets.

He said he was tracking prices in the “middle ground,” cities such as Toronto, Montreal and Ottawa, which still have fairly robust economic fundamentals but haven’t been supercharged by the commodities boom.

Prices in those cities all rose moderately year-over-year in June, up 3.7 per cent in Toronto, 4 per cent in Montreal and 6.8 per cent in Ottawa.

The Canadian and U.S. markets are still very different, CREA president Calvin Lindberg said in a statement. U.S. home prices dropped by 14.1 per cent in the first quarter of the year, according to the benchmark Case-Shiller national home price index.

Out local market stands out as the biggest year-over-year decrease in sales in all the Nation, Greater Vancouver saw sales drop 42.9% from last June.

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Looks like the Canadian government is starting to heed the US housing market lesson - the Federal Government will no longer guarantee 40 year or zero down mortgages. The new limit will be a 35 year maximum term and a minimum 5% down payment will be required on all new federally guaranteed mortgages.

The federal government will no longer guarantee 40-year or zero-down mortgages in an effort to avoid a housing crisis like the sub-prime mortgage meltdown experienced in the United States.

In an announcement released today, the government said government-backed mortgages would require a minimum down payment of five per cent and a maximum amortization period of 35 years. The borrower would have to have a consistent minimum credit score and there would be new loan documentation standards.

“Today’s announcement marks a responsible and measured approach by the Government to ensure Canada’s housing market remains strong and to reduce the risk of a U.S.-style housing bubble developing in Canada,” a release issued by the federal Department of Finance said.

The new rules will take effect Oct. 15, 2008 to allow existing mortgage pre-approvals to be used or expire.

So get out there and get your 40 year zero down mortgage while you can, these things are destined to become collectors items! My guess is we’re about to find out how thin of a speculative margin has been driving the Vancouver real estate boom.

This is a pass-off post to Paul Boenisch at nvcondos.ca who has just posted some dramatic month-end June stats on his blog.

If you haven’t seen these numbers yet, or if you have any doubt that the Lower Mainland real estate market is undergoing a dramatic shift, check them out now.  Supply continues to grow while sales keep dropping.

Here are a few highlights:

Sales down 41% from June 2007
Inventory up 53% from last year
North Vancouver inventory up 113%

Check out Paul’s blog for all these stats and more graphed out for some dramatic visuals.

So far prices haven’t been impacted much at all, but increasing supply and decreasing demand will put pressure there unless this dramatic shift reverses soon.  Could we be in danger of tracking the US market?

During this weekends open-topic post ‘tacoman’ noted that someone has started up a Victoria area flippers in trouble blog modeled after the original Sacramento area flippers in trouble and Phoenix flippers in trouble.  These blogs all track drops in asking prices and where available show recent sales activity.

The Victoria area blog isn’t yet showing drops anywhere near as dramatic as the US based blogs are tracking but it will be interesting to see where this goes as the market changes.  On the Sacramento blog the first listing is a house bought in March 2007 for $1,308,000, currently sitting on the market with an asking price of $600k.

Good news if you’re looking for recreational property in BC, you’ll find less competition as demand has dropped off and recreational property in areas like the south Okanagan has moved into ‘clear buyer territory’ according to RE/Max:

“The demand for waterfront recreational properties remains strong, but prices have stabilized,” Re/Max regional executive vice-president Elton Ash said in an interview. “That’s good news for consumers because there are fewer multiple offers driving prices higher.”

As well, Ash said, the availability of bargain real estate properties in the U.S. has clearly reduced the number of buyers looking at Canadian recreational properties.

“We see U.S. owners of Canadian properties putting them up for sale now so they can take their profits and reinvest them in the U.S sun belt,” Ash said.

…

While the price of a three-bedroom winterized home on ocean frontage on Saltspring Island starts at about $1.3 million, there are more affordable properties for sale throughout B.C.

The report said the South Okanagan market has moved into “clear buyer territory” for the first time in five years, with rising inventories, falling sales and price corrections underway.

The price of a two-bedroom condo on the water near Penticton now starts at about $400,000, with some developers paying the GST and providing complete appliance packages.

The report noted the North Okanagan recreational property market has also reached a plateau, but affordability remains an issue with a typical three-bedroom winterized home on a 66-foot Okanagan Lake lot starting at $1.5 million.

Does less competition and low interest rates make this the perfect buying opportunity or are ‘price corrections’ due to take a further chunk out of the recreational real estate market?

From the ’sun predicted to set’ department of todays Province comes this article: BC developer warns of cooling condo market.

B.C.’s development industry must be nimble, disciplined and well-financed to survive the cooling of the provincial market, a veteran developer says.

The Lower Mainland has yet to experience the full impact of the U.S. housing slowdown and the troubles sweeping the Interior’s forest sector, Concert Properties president David Podmore said yesterday.

“I do think you’re going to see a continued slowing of our economy as . . . what’s happening in the Interior and the U.S. spill over,” Podmore told a conference on the future of B.C.’s housing industry.

“You’re going to have to really sharpen your skills to be successful and to compete effectively.”

Podmore said developers should stop relying on pre-sales, which he called a phenomenon of the past eight to 10 years.

The market is heading into a period where projects may take half-a-year to sell out, he said.

Disciplined developers will pull the plug on projects if it becomes clear they can’t succeed, he said.

There will be opportunities for well-financed developers to take over idled projects - but they must be fast on their feet, he said.

The ‘pulling of plugs’ has already started to happen on some projects like the Eden group Elyse.  Those that don’t pull the plug when they can get it pulled for them and go into recievership Sophia, H+H, Gardencity, etc.  There’s good news though, as the US housing slowdown continues it’s forecast that material prices will moderate.

Are you priced out of the Vancouver real estate market? According to the Province, you’re not the only one.  The weekend the Province ran a series of articles on the costly local real estate market:

So who’s buying? 

The answer is anyone with one or more of the following: wealthy boomer parents, equity from previous real estate or extremely high double-income earnings.

But even with those prerequisites, many are stretching their limits.

“Everybody maxes,” says Marty Pospischil, a realtor with Dexter Realty specializing in the west side.

The profile of a typical buyer of a $1.3-million, three-bed, two-bath west-side home is a couple between 35 and 45 years old with one or two young children. They are both professionals who have ascended the ranks — think stockbroker, lawyer, doctor.

They will usually have a down payment of $400,000 to $500,000 — derived from a combination of personal equity, inheritance or a substantial gift from a wealthy boomer parent, says Pospischil.

That means they’re still borrowing between $800,000-$900,000.

Expectations clash with reality:

With the income-to-house-price ratio the highest it’s ever been in B.C., the overwhelming perception — particularly in Vancouver — is that the market has changed the definition of “middle class” and displaced the working poor.

It is increasingly common to see children raised in condos, married couples living in their parents’ basements, young professionals taking on second jobs, workers commuting long hours, the growth of the 40-year mortgage (which 65 per cent of first-time buyers are now using, according to a RE/MAX report) and the realization for some that an inheritance is the only way to a single-family home.

Tsur Somerville: its not a bubble:

“If you say bubble, then at some point it’s going to pop. And if you look at our price increases, they’ve been double-digit, but for the most part they’ve been between 11 to 15 per cent for the past few years. That’s high, but in a bubble you start to see 20-per-cent growth, 30-per-cent growth. Just really rapid acceleration, and we haven’t seen that. That’s what happened in 1981 and 1982 . . . That’s what a bubble looks like.”

Reader feedback:

John: There’s no point complaining about prices. I think people should focus their energy on how they can find new ideas/businesses/solutions to generate more income. If you spend all your time complaining you won’t have enough time thinking about new businesses that can work and make more money!

Spring is here and the listings are blooming like crazy. Both Vancouver and the Fraser Valley are being hit by a combination of fewer buyers and a greater number of owners looking to cash out. Here’s the REBGV listings chart for the last 4 years courtesy of Paul Boenisch:

Clicking the graph above will bring you to his blog which has additional graphs for sub areas- we’re seeing rapid inventory growth on the west side and north shore. Paul also tracks daily statistics on sales, price and listings on his website.

In the Fraser Valley listings are growing as well - They now have a near record amount of inventory. The following sales and listings chart for the FVREB was created by Mohican at Langley Financial Planning. Check out his site for more charts and detail on the Fraser Valley market.

It looks like growing inventory is starting to put some pressure on prices. Prices in all categories are up year over year, but the month over month figures look unusual for the spring selling season. The Benchmark price is down in all categories in North Vancouver, slightly up for houses and townhouses in Vancouver, but Vancouver condo’s and apartments saw their benchmark price drop by 3.16% in April. The spring market so far this year is looking markedly different from the last few years, we’ll see how this trend holds up into the summer.

I’m not sure why this article is located on ‘globe sports’ in the hockey section, but this article about mortgage trends in Canada has some shocking statistics based on a recent RE/Max report and some interesting quotes from a few of the big Canadian banks:

Nearly two-thirds of buyers in major centres now favour extended amortization periods of up to 40 years, while putting little or no money down was prevalent in 38 per cent of regional markets surveyed across Canada.

The country’s real estate industry has played down any similarities to the U.S. when it comes to subprime borrowers. But as new segments of the Canadian population enter the market, the findings raise questions about what’s been driving soaring house prices in recent years.

“The reason we think the market has been staying hotter much longer than anyone anticipated was because of these newer amortization mortgages,” said Craig Alexander at Toronto-Dominion Bank.

“Because it really does change the affordability equation,” Mr. Alexander said.

Canada’s housing market has for years defied predictions of a slowdown. From 2002 to 2007, average home prices rose at about 10 per cent a year nationally, Mr. Alexander figures. A willingness to buy now and pay later explains much of the recent heat. Longer amortization mortgages “have had a very profound impact on the Canadian housing market since they were introduced” in 2006, he added.

Buying a house has become increasingly accessible. The flip side, though, is that more home buyers are now susceptible should the housing or labour markets weaken, or if interest rates change direction.

“We’re more vulnerable than we were in the past, and I think that’s just a factor of financial and mortgage innovation,” said Adrienne Warren at Bank of Nova Scotia. “At the same time, it’s a trade-off - more people are getting into home ownership earlier.”

In their report RE/Max attributes the boom to these new mortgage products:

“Innovative financing has become key to home ownership in today’s environment,” yesterday’s report said. “Entry-level purchasers are adjusting their expectations by sacrificing size, location, and even long-term financial freedom to overcome challenges such as rising prices and serious supply issues.”

Policy changes help explain why so many people have been entering the market. Ottawa extended the maximum amortization period to up to 40 years from 25 years in 2006. In the same year, Canada Mortgage and Housing Corp. began providing insurance to lenders for interest-only mortgages.

Mr. Alexander figures that as many as 70 per cent of first-time buyers are opting for longer amortizations. “It’s a double-edged sword. It brings down your monthly payments. But it will actually double the amount of interest you pay over the lifetime of the loan.”

According to this article in the Globe and Mail the Canadian housing boom is now ‘officially over‘.

It’s time for Canadians to bid the housing boom farewell as data for the first quarter of the year, released Thursday by the Canadian Real Estate Association (CREA), showed a 13 per cent tumble in existing home sales year-to-date.

“Canada’s six-year housing market boom is officially over. Aside from a few choice Prairie locales, sales are melting faster than this year’s snow pack,” Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., said in a research note.

Double-digit declines in sales activity in “more markets than you can shake a stick at,” suggest the weakness has spread across Canada rather than being centred in any specific market, Mr. Porter said in an interview.

Home sales waned and new listings surged in the first quarter of 2008 as activity in Toronto cooled and a glut of sellers hit the markets in Western Canada, according to CREA’s data.

So we’re not the only city in Canada showing this trend change. Spring is traditionally a strong selling season but it hasn’t kicked in yet this year in Vancouver, it’ll be interesting to watch the growing number of listing into the start of the summer to see how strong this trend is.