Vancouver Condo Info

Home sales in BC are down 11 percent in May 2010 compared to April, but prices are up and set to flatten according to the BC Real Estate Association.

The survey also concluded that, year-to-date, B.C. residential sales dollar volume increased 50 per cent to $17.5 billion, compared to the same period last year. Residential sales rose 31 per cent to 34,619 year-to-date, while the average price climbed 14 per cent to $505,468 over the same period.

The BCREA said in another recent survey that it expects sales to rise next year by about four per cent.

A separate survey by the Canadian Real Estate Association (CREA) recently forecast that prices would rise 2.3 per cent this year across the province before slipping back by 3.5 per cent in 2011.

Full article in the Vancouver Sun

The BC Real Estate Association has generously released to the public their market forecast for the near future so that all investors may partake of their wisdom. As they look ahead, they see a slowdown for 2010 before sales grow again in 2011. Even closer to home this is what they foresee for Vancouver:

For Metro Vancouver, sales are forecast to drop 7.9 per cent this year and rise 4.5 per cent in 2011 to 34,900 units. Prices are expected to increase 10.7 per cent this year in Greater Vancouver to $655,900 and 0.4 per cent in 2011 to $658,800.

For prices across BC the BCREA is predicting a rise of 6% this year and 1% next year. Evidently they use a different brand of Crystal Ball than the Canadian Real Estate Association:

..a survey by the Canadian Real Estate Association (CREA) released last week forecast that prices would rise 2.3 per cent this year to $476,900 before slipping back 3.5 per cent in 2011.

The CREA survey also predicted that sales across the province would decrease almost six per cent to 80,000 transactions this year.

Read the full article over at the Vancouver Sun.

Ladies and gentlemen, please bear with us for a moment, we seem to be experiencing technical difficulties with the Crystal-rear-view-mirror ball. For whatever reason it appears that BC house prices have not continued their ever upward climb to the stars. This temporary setback has caused the CREA to readjust the national forecast in a downward direction.

Here is a CBC news video about the local Vancouver market ‘cooling’. It features many pretty faces such as Cameron Muir, Jake Moldowan and Larry Yatkowsky.

Thanks to Anonymous and Jesse for the links!

Household debt levels in Canada are at record levels, higher than Greece. The Canadian reaction to recession has been to take on more debt, which has some worried about the impact that will have on our economy going forward.

Household debt has more than doubled from 1989 levels and now stands at a record $1-trillion – or $1.47 for every dollar of disposable income. With the Bank of Canada expected to raise interest rates, perhaps as early as next week, vulnerable Canadians could soon find themselves emptying their pockets to cover higher interest payments.

“The high rate of household indebtedness is a source of risk” to the Canadian economy, the Organization for Economic Co-operation and Development cautioned in a report Wednesday. It noted that household debt has swelled further in recent months – an unusual development. People usually save during recessions.

Read the full article in the Globe and Mail.

CIBC World Markets has just released a report calling Canadian home prices ‘overvalued’ and forecasting falling prices:

CIBC World Markets economist Benjamin Tal said Tuesday that prices could decline by as much as 10 per cent in the next two years, but that a “violent” correction similar to the one seen in the United States remains unlikely.

“We are more likely to see higher interest rates causing a modest decline in prices,” he said. “Because we lack the driver for a more violent decline, we should expect a more orderly rebalancing.”

That’s in the nation as a whole, where median price to income ratios in the five largest cities combined have reached 5.62 (the US market peaked at 5). Here in Vancouver we’re currently running at a ratio higher than 9, similar to where Miami was in 2006.

Last week, TD Bank issued a report that suggested prices could fall by 2.7 per cent in 2011. The Canadian Real Estate Association expects to see a decline of 1.5 per cent. Among recent forecasts, only the Canada Mortgage and Housing Corp. calls for higher prices in 2011, with an anticipated gain of 1.3 per cent.

..of course the Canada Mortgage and Housing Corp. is the one pumping government money into the housing market. They’ve gone from $138 billion securitized in 2007 and jacked that up by more than double in just a few short years with close to $500 billion in Canadian mortgages securitized today. Do they have the power to make their contrary prediction come true?

Landcor data is out and in the first three months of 2010 both the number and value of BC real estate transactions dropped more than 25% from the previous quarter.

The results quantify the trend economists such as Cameron Muir, chief economist for the B.C. Real Estate Association, have observed occurring since January.

Landcor’s numbers “certainly support the data we’ve been looking at that shows that obviously the pace of sales have slowed since the last quarter of 2009,” Muir said in an interview.

Last year’s “fourth-quarter peak is unlikely to reoccur in 2010.”

Landcor president Rudy Nielsen said B.C. home sales typically slow at the beginning of the year, but the first-quarter of 2010 slowed more than usual compared with the last decade of results. This is in part, he believes, because of the Olympics.

Nielsen added that consumer uncertainty over a host of issues, ranging from the global economic situation to unknown effects of the harmonized sales tax, have consumers sitting on their wallets.

The agency, which insures almost $500-million of Canadian mortgages, said the average cost of a home by the end of 2011 should be $350,000. That would be a gain of 1.4 per cent over April’s record high of $344,968.

Forecasting higher prices next year puts the agency at odds with the Canadian Real Estate Association and Toronto-Dominion Bank, both of which are calling for prices to drop by 1.5 per cent and 2.7 per cent respectively in 2011.

A week ago we had a community driven interview of Petr and Ola, creators of the instant classic Vancouver Real Estate quiz “Crackshack or Mansion?”.  You asked your questions and voted up the comments you wanted to hear answers to.  Well we’ve sent the highest rated questions on to Petr and Ola and here are their answers:

How long have they lived in Vancouver?
PETR: I have lived here since 2002 and Ola has lived here since she was about 10 years old.

Do they rent or own? (wouldn’t want to presume even the obvious!)
PETR: haha. We rent.
OLA: …one of these “special” 1950’s bungalows.

If they rent, have they been tempted to buy?
PETR: Ola had considered buying a place with her friend in about 2007. I thought the bubble was pretty much at its peak back then and strongly encouraged her to wait. A lot of her friends were getting into the housing market (or thinking about it) and I think the mob mentality almost got the best of her. It didn’t take long to convince it’s a crazy idea (to buy with a friend, and at these prices).
OLA: I shudder when I think about it now. Even if prices kept going up and interest rates stayed low, it’s insane to tie yourself down with other people like that.

Have they considered leaving Vancouver because of RE prices?
PETR: Even though we are convinced this is a bubble that will have a severe correction, the prices will probably still be too high for us. I wouldn’t pay 200,000 for most of those million dollar mansions. The city is nice but it has a lot of competition for the pretty city of the month award. The bubble will pop everywhere so the interior of BC will look pretty good.
OLA: I must admit, owning my dream home has been a fantasy since I was 8. However, my dreams are extensive and require many acres and handcrafted woodwork. It would be a trophy for career success. It would be a frivolous indulgence when I have excess cash flow. Enslaving myself to a peach-coloured 80’s built condo isn’t really a replacement for that.

(more…)

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.

The Bank of Canada has announced that they are keeping the overnight rate at the record low of .25% for now but sent a strong message that rates will be going up sooner rather than later. Expectations that the Bank will raise rates on June 1st have sent the Loony up even higher, surpassing the US dollar.

The dollar jumped 1.58 cents to $1.0012 (U.S.) as investors bet interest rate increases in Canada will outpace those in the United States, where the Federal Reserve shows no signs of boosting rates any time soon.

With the timeline for a rate hike nearly set in stone, investors and economists are turning their attention to how fast rates will move.

Policy makers will end this year with a lending rate of 1.5 per cent, many economists believe, moving to between 2.5 and 3.5 per cent by the end of next year.

The level that most economists consider “neutral” is 4.5 per cent.

If you’ve got a variable rate mortgage now might be a good time to lock in.  If you’re over-extended now might be a good time to sell.  I suspect “neutral” rates won’t have a neutral effect on Vancouver house prices at this level.