Vancouver Condo Info

David Lereah - the head economist for the National Association of Realtors in the US is stepping down to take a job with an online real estate service. So far his sunny outlook on the US housing market has failed to be reflected in reality with foreclosures up, inventory up and prices down in many many markets. He’s been accused of ‘cheerleading’ the US market and dubbed ‘David Liar-ah’ by bloggers who feel his reports have been biased and misleading.

The economist who prodded investors into the U.S. housing boom and has been skewered by bloggers during the bust is leaving a top real estate trade association, the group said Monday.

David Lereah, the author of “Are You Missing the Real Estate Boom?” will leave the the National Association of Realtors by the middle of next month after serving as the head economist for seven years, a spokesman said.

Lereah was the Realtors’ analyst through the five-year run-up in home values that ended in 2005, and he has continued to deliver the group’s outlook through the current downturn.

Here’s a link to the full article about the ‘anti-chicken-little’ lereah on CNN.

CIBC World Markets says that the average Canadian house price will double in the next 20 years:

Yes, the number of people aged 45 to 54 is expected to drop by 2.5 million by 2026 as the baby boomers age. But this age group accounts for only 12 per cent of the housing demand, it said.

Most home purchases take place when people are younger. CIBC says 68 per cent of all first-time home buying is done by people aged 25 to 44. That group is expected to decline only slightly in the coming two decades.

So only slightly less demand = double prices. They base their prediction on three factors:

-Interest rates are expected to stay low
For twenty years? Wow! That’s some crystal ball!

-Immigration is expected to increase
Good thing since its so much lower in BC now than the 90’s.

-New mortgage products will make home ownership more accessible.
What great news! You wouldn’t happen to offer any of those would you CIBC? You know, like those great 60 year mortgages in Japan?

Update: Cailin points out the obvious spin on this story. If all these positive factors come into play and house prices ‘double’ in the next twenty years that works out to be about 3.75% a year compounded, or a bit less than a presidents choice savings account, but I guess that doesn’t sound quite as impressive huh?

Some enterprising fellows are now offering to put a short-range radio transmitter in your ‘for sale’ sign to broadcast a commercial to anyone on the block interested in your house or condo.. Its an interesting idea, but most people don’t bother to put a price on their sign, so what (besides music and sound effects) are they going to put in their custom commercial? And would this marketing system have any advantages over the good ol’ world wide web?

I’m still cringing from the last Rennie Condo ad I saw in a theatre, I wonder if these audio commercials feature soft jazz and lots of talk about ‘lifestyle’.

There’s an interesting article in The Star about discount brokers in the real estate business and the impact they may have on the cost of buying and selling.

While other industries, such as travel agents and stock brokerages, have gone the discount route, the real estate industry has largely held steadfast.

Realtors have been successful at holding their commissions at a standard 5 per cent in recent years, although that is already down from 6 per cent a decade or more ago.

But in a market where homes are selling in record numbers and at record prices, some consumers are wondering why commissions are still so high in the real estate business.

They also mention the Competition bureaus investigation of the Canadian Real Estate Association:

The Canadian Competition Bureau, meanwhile, is investigating the Canadian Real Estate Association to see if the CREA’s guidelines discourage discount brokerage houses from using the Multiple Listing Service, which the association owns.

CREA officials say they are simply protecting their trademark.

I’ve noticed a lot of discount broker signs on condos recently, I wonder how much of an impact they are having here in Vancouver. As the article points out - in a hot market it may be easy to sell through a discount broker, but what happens when the market slows?

So what do you think- Are discount brokers the way of the future and would you feel comfortable using them to sell a property in a slower market?

Digi pointed out this commentary on risks in the Vancouver ‘real’ estate market from this weekends Globe and Mail. Its an entertaining read as well as some food for thought:

Nature is logical, but people are not. They seem to think that the laws of physics won’t apply if they spend enough money. Sometimes this works for a while, but you can hold back the tide or suspend the forces of gravity for only so long, before they boomerang and thwack you in the puss.

When imaginary value meets real water and real mud, all that pretend money washes away. You can build on the supposition that nothing bad will happen, even put your house on a sandbar in the middle of a river, thinking the river won’t ever rise, but that’s what rivers do, always have done. Why should they spare you and your big-screen TV?

There’s an article in the National Post titled something grand about going small. Canadians are living in ever-larger houses, except in vancouver where they’re living in ever-smaller condos. The example in the article is counselor Gordon Prices’ west end apartment that is around 1100 square feet “which makes it about half the size of the average Canadian home.”

Vancouverites are used to making do with less. Most have no choice; the city is sandwiched between water and mountains, and real estate here is astronomically priced, the highest in Canada. Traditional single-family homes — even small bungalows — cannot be had for less than $500,000, making them unattainable for even moderately high-income earners.

Figures released last week indicate that detached bungalows in Vancouver sell for an average of $758,000; in Toronto, they sell for an average of $387,744.

Other Canadians may wonder how people in Vancouver could possibly cope inside such small homes; Mr. Price’s apartment is actually a generous size, by West End standards. And his neighbourhood has one of the highest population densities in North America, with about 20,000 people per square kilometre. That is more than four times the density of Montreal, one of Canada’s oldest and most congested cities.

I’m glad they point out that 1100 square feet is actually a large west end apartment - interesting that they don’t mention the sub-500 square foot ultra tiny condo’s that are going in to many new towers downtown.

..So who wants to live in luxury?

Everyone apparently. Just take a look around Vancouver at the thousands of new condo units currently under construction - its getting harder and harder to find housing that isn’t marketed as
‘luxurious’. From ‘luxury’ basement suites to 400 square foot ‘luxury’ condos in the downtown core, we must live in the most luxurious city on earth!

The guys behind seattlebubble.com and socalbubble.com have put together a new site that addresses housing market issues, particularly the fear-inducing ‘Priced Out Forever!‘ myth.

have you ever thought through what it would really mean if across the country, hundreds of thousands of people just like you really were being priced out forever? Who would buy homes? What would happen to the housing market as a whole? These are questions that are frequently ignored.
…
The absolute worst reason to buy a home is “I’m afraid that if I don’t buy now I’ll be priced out forever! The biggest financial decision in your life should be based on reason, logic, and sound financial planning, not fear.

Check it out at the easy to remember URL: pricedoutforever.com

Yesterday I posted a link to a report by Genworth Financial that declared that “over the next four years, Vancouver condo demand is expected to slow to balance with supply, although a correction is not expected.”. As one poster commented, Genworth Financial was one of the first in Canada to insure zero-down and 40 year mortgages as part of their goal to “make homeownership more affordable and accessible throughout Canada”.

I’m not entirely clear how helping to drive up debt levels is helping this goal, but every company needs a slogan.

I see now that this story is running in the Province, pretty much verbatim from the press release. The story subtitle is ‘growth to continue without any correction’ which, though slightly plausible, is still surprising to see as a statement of absolute truth. Imagine a company issuing a press release with a prediction that their stock price will “rise about 6.2 per cent this year and average 4.4-per-cent annual growth through 2010″.

I don’t doubt that its difficult work being a reporter, but wouldn’t it be more efficient and cheaper for the paper to just reprint the press release without the byline? If the market does correct, I expect we’ll see a lot more of these press releases from real estate agencies, banks, mortgage brokers, etc. If we hit year over year price drops then we’ll get the ones that say ‘the worst is over!’.

Paying reporters to retype these press releases over and over seems inefficient at best.

According to a report issued today by Genworth Financial strong demand will drive steady price increases in the Vancouver condo market until 2010.

“In 2006, Vancouver’s condo market remained as strong as ever and the good news is that growth is forecast to continue without a price correction, so it is still a smart time for buyers to realize the dream of homeownership,” said Peter Vukanovich, president Genworth Financial Canada. The Metropolitan Condominium Outlook reviewed resale condo markets in Montreal, Ottawa, Toronto, Calgary, Edmonton and Vancouver based on data from the Conference Board of Canada. New condo prices were not included.

According to the news release “Genworth Financial Canada, The Homeownership Company, works with lenders, mortgage brokers, real estate agents and builders to make homeownership more affordable and accessible throughout Canada.”

So they’re an impartial source for sure.

But heres a question I have: If the market will continue to rise gently until 2010 getting further and further away from rent values, what happens after 2010 and when is the best time to sell to realize gains on a Vancouver property?