Category Archives: opinion

What sets house prices?

Jesse put together a nice clear presentation on our housing market.

Check it out.

His argument is that the factors that set house prices are different for the long term than they are for the short term.

If short term factors drive up supply and pull demand forward, what happens in the future to balance this out?

With housing affordability in Vancouver hitting an all time low and sales scrapping along under 100 a day It sure looks like Months of Inventory is starting to flash a big warning sign for current buyers.

Time to cut our losses on Olympic Village?

The City of Vancouver still owes lots of money for the Olympic Village condo development.

They aren’t saying how much but it looks like it’s currently at least a couple hundred million.

Is it time to cut our losses?

Developer Michael Geller thinks so. In this Province article he says it’s time to cut the prices and get out while we can.

As Vancouver’s real estate market cools, losses on the troubled Olympic Village development could soar above $225-million unless condo king Bob Rennie quickly drops prices on unsold units that have languished on the market for too long.

That’s the view of developer and architect Michael Geller, a former NPA council candidate, who suggests flawed pricing and weak marketing is turning the fiasco on False Creek from bad to worse.

Read the full article here.

What do you think? Does the city stand to lose more by holding out for ‘maximum price’ or by selling quickly at a discount?

Team Ben! Ben is wrong!

Real estate markets move slowly.

Really slowly.

So let’s entertain ourselves with some bear fights.

A couple of days ago Garth Turner came to town with his traveling bear show from Greater Fool.  In that presentation some are saying he used charts from The Economic Analyst Ben Rabidoux without any attribution.

This kicked off a twitter snark-fest as seen below:

Now I didn’t see the presentation, so I don’t know if there were charts used without attribution, but in any case: BEN IS WRONG!

No, not wrong in this twitter war – Ben is correct to ask for attribution for his work and Turner is a jerk for neither clarifying nor denying the charge.

The reason I say Ben is wrong is because of what he says in this article about new record debt levels for Canadians:

“You can not have everyone in Canada pay off their debts at the same time because that will drag on the economy,” he said. “It is a strange dynamic. How do you pay off the debt when paying off the debt itself becomes an economic headwind?”

OK, maybe wrong is not the right word, more like incomplete.  As Patriotz points out:

I think Ben’s scenario is slightly off the mark. Crunch time will happen not when people decide to start paying off their debts, but when they simply can’t borrow any more.

And as Fixieguy points out it should read something more like this:

“… it shows the extent to which our economic growth is based on debt instead of fundamentals, a scenario which can’t be sustained for long before the jobs created evaporate…”

So mark your calendars, for here is one thing that Ben is wrong about and that is remarkable because Ben is never wrong.

Village starts to dig itself out of hole

Good news! Now that shops and restaurants have opened up in the former Millennium Water Olympic Village housing development it’s no longer the creepy ghost town in the middle of the city!

Not only are there signs of life down there, the city actually looks like they’re starting to shrink the big ball of debts they acquired when they took responsibility for the project.

This progress is hard won and comes thanks to a number of efforts including:

-The city lowered property tax for businesses
-In February 2011 prices were dropped 30%
-In August an additional $5k in incentives offered to buyers

The city isn’t saying how much they still owe on the village, but the debt at the end of 2011 was $462 million.  Most of the extra expenses are from repairs for building deficiencies and marketing costs.

It looks like there is now just over 25% of the condo stock that remains unsold, but the receiver has put a block of rental units up for sale.  The buyer will be required to maintain those units as rentals for 20 years.

“The purpose and benefit of the sale of the rental buildings is to generate cash to repay the loan payable to the secured lender [the City of Vancouver],” said a statement from Ernst & Young. “It is particularly advantageous to undertake such now while interest rates remain low, the rental buildings at The Village on False Creek are fully leased and there remains an active pool of potential and interested buyers.”

The receiver also got permission from the court to put the project into bankruptcy, if needed, a move that it says is not being contemplated right now but “gives … the flexibility to consider the option of generating value from SEFC’s operating tax losses.”

Read the full article in the Globe and Mail.

The ‘right price’ keeps changing

Yesterday we heard from a Vancouver Realtor about why condos aren’t selling.

They’re overpriced.

And now there’s this article in the Vancouver Sun Buyers on the Sidelines as Market Slows.

Its all about the market slowdown – we’re now seeing the lowest number of sales since 2000 in Vancouver.

Nice houses that are priced right are selling within days, some in bidding wars. But anything priced too high or considered undesirable is apt to sit idle in this market, which is, according to the Real Estate Board of Greater Vancouver, witnessing the lowest total sales for the region since July, 2000. The Board reported 2,098 property sales in July, a drop of 11.2 per cent compared to June. It’s a drop of 18.4 per cent compared to July, 2011.

There are many anecdotal stories around the Lower Mainland about houses that have sat on the market for months, priced too high for the more price-conscious market. A six-year-old West Vancouver home on a 21,000-square-foot lot overlooking Capilano Golf & Country Club was originally listed at $3.695-million three months ago. The owners have reduced the price by $400,000 and it still hasn’t sold.

“There is a lot of product but it’s not selling for the price that people expected or hoped for,” says real estate finance expert Tsur Somerville, who is director of the University of B.C.’s Centre for Urban Economics and Real Estate. “People aren’t buying at the prices that are being set.”

Well here’s a funny thing about ‘the right price’ in a correcting market: it keeps changing.

I live in a BC market that is several years into it’s correction and I can tell you that the places that are selling are moving only at prices that are lower than the ‘right price’ a year ago and far lower than the ‘right price’ several years ago.