Vancouver Condo Info

Crashcow posted this comment over the weekend: a field report on the opening sale of the very lightly used Millennium Water Olympic Village condos:

Field Report of Millennium Water
May 15, 10

I woke up this morning with a massive hangover. Wow, what an 18K party that was! But with the weather so nice today, I decided to checkout my first open house in a long time to get a feel for what’s happening in the trenches. And not just any open house, an entire open village. Little did I know how much of a treat it would end up being.

On the way to Millennium Water, I passed by an abnormal quantity of For Sale signs. I kept asking myself how Rennie is going to pull off a 474 condo sale when inventory is exploding and sales are faltering. But soon after I walked into the gates of the Olympic Village, I knew I had stepped into a dream world of magic.

If Vancouver ever had a ground zero for Irrational Exuberance, Millennium Water is it. And if Bob Rennie is ever the King of anything, it’s hype. The man has carefully orchestrated a circus of clowns, bands, tents, treasure hunts and euphoria. When bands are cheering on lined up speculators and the King himself is handing everyone cookies, what is being witnessed is the last “hurrah” of a heavily inflated market.

I lined up to view a condo and couldn’t help but overhearing what the herd was chanting. One of my favourites was, “I don’t know if I like this area, but I love the wave pattern on the wall.”

I followed the crowd into a staged 1 bed, 2-den condo at slightly over 1,000 sq. feet. I overheard some lady asking an agent the price and he replied with a straight face:
“One-point-three-million.”

The lady’s jaw dropped, she shook her head, and moved on. I couldn’t contain myself and had to keep the conversation going.

- Me: “The miracles of record low interest rates. So that’s roughly $1,200 per sq. ft?”
- Agent: “Yes, but I’m also selling units down the street for $500 per sq. ft”
- Me: “So why, in your opinion, does this place come at a $700,000 premium?”
- Agent: “It’s an opportunity to be a part of this famous community and the proximity to the water.”
- Me: “Not only are you asking for an outrageous premium, you’re doing it at a time when there are over 18,000 units on the market, CHMC rules are tightening and mortgage rates are climbing.”
- Agent: “You should then really consider the units we have listed down the street.”

So I followed the yellow brick road down the street and into another Rennie building called “The Maynard’s Block.” And sure enough, studios were priced at half a million.

Buy now, or be priced out forever.

-Crashcow

TD Bank is the most recent pessimistic soothsayer when it comes to the Canadian housing market, with a prediction of falling house prices in 2011.

While income and employment seems to be recovering quickly from the recession, the number of listings to hit the market and the number of new housing starts has caught the bank by surprise. It had previously expected prices to gain 1.6 per cent in 2011 in inflation adjusted terms, the bank now is calling for a 2.7-per-cent drop.

Ontario and British Columbia are expected to bear the brunt of the decline, seeing their markets drop 3.4 per cent and 3 per cent respectively.

Ah! They’ve been paying attention to listings growth.  Don’t they know that just means more options for buyers and that makes it a great time to buy?

Paulb and paintedturtle pointed out this article in the Globe and Mail – Housing Affordability: the great quandry.  Why there’s time to wait for the right home at the right price.

The one city to worry about if you’re a homeowner is Vancouver, where normal mortgage rates would have resulted in the typical household spending 78 per cent of its income to carry a bungalow, just shy of the peak level.

History shows that it’s impossible to accurately predict short-term movements of house prices – markets regularly overshoot rational levels both on the way up and the way down. What we can say is that based on current affordability, if house prices do continue to escalate, at some point they’re almost certain to correct back down.

That means there’s no rush to buy and time to wait for the right home at the right price – and that for the next while at least home buyers should evaluate houses as places to live rather than on their potential for appreciation.

Ok. I see what’s going on here.  The Globe and Mail has worked themselves into a jealous rage because our properties are worth so much and are trying to talk down our market.  It won’t work guys.  We know better than that, we evaluate property purchases based on how much a month they cost with record low interest rates and pencil in 12% increase in prices each year.  Everybody knows prices never drop in Vancouver.

Here’s a handy financial planning tip: Quit your job and start flipping condos.

You can not go wrong with this simple plan my friend, just look at the facts:

1. BC Jobs don’t pay well.  look at this chart, just look at it.  Our incomes have gone up, but not by as much as in Alberta or Ontario, both of whom get paid much better than us.   At least our houses cost more.

2. Your job may leave you.  Quit it before it quits you.  In January 2009 the Metro Vancouver unemployment rate was 4.9%.  Now it’s 7.8%.  See which way that’s going?  hint: it’s the opposite of house prices.  Make your own secure future in the real estate biz today!

3. The Government wants you to.  If the government didn’t want you to be speculating on real estate they wouldn’t hold interest rates at .25% and insure your mortgage with just 5% down (which the bank will give back to you in cash!) would they? It’s a pretty clear message, the only real road to riches is REAL ESTATE baby!  We can all be Donald Trump!

4. Real Estate Never Goes Down.  This is self explanatory.  Prices have risen tremendously in Vancouver which clearly means it’s a hot sector whose track record is proven.  In March 2010 the REBGV benchmark house price dropped by $455 to only $800,341.  I smell a buying opportunity!

Does this sound exciting to you?  Then YOU are the kind of financial intellect I’d like to work with!

I’m willing to offer you a very special deal for a limited time only.  Send me $15,000 and I will send to you, absolutely free, a handsome inkjet print of these words on a 8.5 x 11 inch piece of paper suitable for framing.  This will empower you to REMEMBER and BELIEVE the words so that they may bring you happiness day after day, even in the event of a completely unforeseeable market collapse.

Now go quit your job and start flipping condos.

March saw listings grow like crazy and April started off with a bang adding close to 500 listings on April 1st alone. The growth in inventory is being mirrored by a growing number of people who appear to be seeking out more information on a Vancouver housing bubble – traffic on this blog has nearly doubled in the last couple of months.

The following comment was posted just before the weekend by GregK71 regarding the growing number of bullish comments here and on other blogs.  I suspect it may sum up the way many readers feel about the current state of the Vancouver real estate market and its likely future:

The bulls on this and other RE blogs absolutely see the writing on the wall going into Q3 and Q4 2010, and beyond. They’re not blind. Arrogant, yes. Foolish, perhaps. Blind, no.

Oddly enough for a group of people apparently content and smug in their asset class, bulls never turn down the chance for a satisfying faeces toss on blogs like VCI. They’re coming here to convince themselves to keep on believing house prices only ever go up. And it’s worked like a charm.

Now, although it doesn’t always seem to come across in their posts, bulls understand market forces. They’ve made money in RE. Big money. Like bears, bulls too sense danger. In their gut, bulls comprehend irrational exuberance. Heck, they’re the ones who’re listing their presales and resales en masse, soon to push listings onward to 25,000 and beyond.

Bulls know this thing’s running on fumes. Bulls know the time is short. Bulls know there’s no such thing as running out of land when you can build up. They know these things.

They also know the Kool-aid is starting to taste a bit, um, funny.

Vancouver bulls, you’ve had an amazing run. You’ve defied the fundamentals for longer than many thought humanely or economically possible. It’s been unreal. It’s been absurd.

To those of you over-leveraged on severely overpriced Vancouver real estate: relish these final few weeks on the upside. You may have a month and a half.

But the tipping point is here. It’s visible. It’s shocking. And it can’t be put off with another rate cut, loosened restriction, extended am or exotic mortgage product. That deck is exhausted.

The process just getting started ends only with utter revulsion and complete contempt for the asset class. Needless to say: it’s going to be a long, long way down.

According to this article in the Globe and Mail, a majority of Canadians are fretting over fears of rising mortgage rates and high prices. Some going so far as to lose sleep over the issue.

Meanwhile, as many as one-third indicate that talk of rising house prices and higher interest rates has influenced their buying decisions, according to a Bank of Montreal survey conducted by Harris-Decima.

“There’s definitely a sense of urgency among home buyers,” said Lynne Kilpatrick, senior vice-president of personal banking at BMO.

The same survey found 71 per cent of current and future homeowners think house prices are too high. It also found about 33 per cent of respondents complained they have lost sleep due to the stress of trying to buy a new home.

On Tuesday, Bank of Nova Scotia forecast in its real estate trends report that home sales are expected to rise 10 per cent to 510,000 this year, while average prices are expected to jump 8 per cent to a record $345,000.

Like most economists’ expectations, Scotiabank said the housing market in the spring should see a flurry of activity, particularly ahead of new sales tax regimes in Ontario and British Columbia and tighter qualifying criteria for insured mortgages.

Here’s an interesting quote from Kamloops-North Thompson MLA Terry Lake about the economic benefits of hosting the winter games:

“Already we know that real-estate in Vancouver went up shortly after the Olympics from people that had visited the area,”

Is there a word missing here?  Did buildings actually elevate into the air due to some anti-gravity effect that visitors had, or are we referring to a specific aspect of the real estate market..  Prices? Interest? Sales? Listings?

Yep, one of those went up.

Its March 18th and inventory numbers for real estate listings in the REBGV greater Vancouver area just rolled over the 14k barrier.  People are talking about this milestone in the forum and drawing comparisons to 2008 which was the last dramatic -though brief- market correction.

Inventory is now 14,027 and growing at a faster rate than it was then, with interest rates at record lows and forecast to rise soon.  On March 15th 2008 inventory was at 12,482 and grew to reach 12,851 by April 1st 2008.  Listings continued to grow through that year until they reached a high of 20,542 on October 15th.

The Federal Government has just announced their anticipated changes to insured mortgage rules to prevent a Canadian housing bubble (which they see no evidence of yet).

The key changes are:

- borrowers must qualify for the 5 year rate even if they opt for a shorter term.

- on refinancing, the maximum amount of equity withdrawal is reduced from 95% to 90%.

- non owner occupied residences bought for speculation now require a 20% down payment.

More info in this Reuters article. There’s still time to buy (or sell) under the old rules, but you better hurry!

I think Domus was the first to point out this article in the Wall Street Journal - it looks like the Canadian Housing Bubble is getting some attention in the US media.

But some economists who are concerned point out that home prices are rising far faster than other measures of economic health. The 2009 price increase of more than 20% came as personal income in Canada fell nearly 1% and total employment was 1.4% lower than the year earlier. In a December report, the Bank of Canada warned that household debt—largely mortgages—was 1.42 times disposable income during the second quarter of 2009, a record high.

Another possible danger: Because Canadian banks typically reset adjustable-rate mortgages every few years, those who are buying now at low rates will likely see increases soon. Toronto-Dominion Bank forecasts suggest that the rate to which many Canadian mortgages are pegged, the prime rate, could nearly double by the end of 2011. The Bank of Canada warned in its December report that if interest rates increase as expected, by mid-2012 about 9% of Canadian households could have so much debt that they’d be “financially vulnerable.”

“This is exactly what happened in the U.S., when affordability had moved way out of whack with prices,” says David Rosenberg, an economist who witnessed America’s housing bubble at Merrill Lynch in New York, and now sees similar trends up north from his post at Toronto-based wealth-management firm Gluskin Sheff.

Reading the article it quickly becomes apparent that Canada = Toronto (with a dash of Red Deer).  So we finally get some mainstream media coverage and there isn’t a single mention of the Vancouver market in there.  What are we, chopped liver?