Vancouver Condo Info

There’s an article over at CNBC talking about the National real estate market, it’s warning signs and various slumps.

They revisit Vancouver Real Estate agent Keith Roy’s very public decision to sell his house last year and say prices have dropped 3.9% in Vancouver, 5.6% in West Van.

They also talk about lending practices in Canada and recent efforts to return CMHC amortization terms to their historical norm.

Some of the loopholes people use to avoid the mortgage restrictions are quite extraordinary. For example, although the government requires buyers to purchase private mortgage insurance on mortgages with 100 percent loan-to-value ratios, eHow says this can be avoided just by getting two mortgages, each for 50 percent of the home value.

Canadians are also allowed to borrow against pensions and life insurance policies to fund their down payments. Even credit cards can be used to fund down payments. So it’s very possible that the total housing debt is actually much higher than the official mortgage debt numbers.

If this sort of thing is being openly discussed even after the government has launched its efforts to curb lending excess, just imagine what kind of shenanigans were going on before the crackdown. The quality of the mortgages made in 2011 and 2012 may turn out to be much worse than is commonly suspected.

Read the full article here.

So is the Canadian market falling apart at this point?  Vancouver has certainly fallen over the last year and this is starting to have an effect on developers as well – the Alba has been put on hold due to a ‘challenging real estate market‘.

Is the market picking up after last years slide?

Troll shared these numbers in the previous thread:

Here’s some facts for the navel gazers to vote down:

Apr 1-15: 115 sales/day
Apr 16-30: 127 sales/day
May 1-8: 137 sales/day

Sales are strengthening during a time that they usually begin to fall off. MOI is also falling. Like it or not bears, this market is beginning to show some signs of strength. Not so simple to just dismiss as a bull trap.

Then frank pointed out we’re still pretty high on the inventory front:

Here’s VMD‘s interpretation of the trend:

Been on vacay in remote areas without internet..
to further Troll #103′s stats:

So far in May: 137/d vs 133 (2012) vs 160 (2011)
Apr 16-30: 127 (2013) vs 140 (2012) vs 159 (2011)
Apr 01-15: 115 (2013) vs 154 (2012) vs 147 (2011)

Look at May vs Apr sales in last few years:
2012: 2853 2011: 3377 2010: 3156 2009: 3524

The statement that “Sales are strengthening during a time that they usually begin to fall off” is incorrect. Sales almost always fall off in June (except 2009), not May.

and here’s Trolls response to that:

I don’t like using monthly numbers because they are skewed by the number of business days, one or two extra days can skew the numbers. I think a better measure is sales/day. For example you show increasing sales for 2012 from April to May, but if you break it down by sales per day, you get the following:

Apr. 1-15: 154 sales/day
Apr. 16-30: 144 sales/day
May 1-8: 133 sales/day

Falling just as I said.

So what do you think? Are we seeing enough of a trend reversal yet to say the market is strengthening or is it a normal spring bump on a long hill down?

There’s another one of those semantics question articles in the Financial Post:

Canadian Housing: Bursting bubble or gentle landing?

Here’s one chunk of that article with a few asides that always seem to be missed:

Lewandowski believes Canada will not suffer a U.S.-style housing crash simply because policymakers had the benefit of watching it happen next door.

“What we experienced here in the U.S. with housing markets and regulators goes directly to the attitude and changes the minister of finance has made in Canada. A regulator who is being proactive is taking Step One in making sure the housing market doesn’t find itself in a bubble,” Lewandowski said.

So often it seems that ‘bubble’ is used as if it refers to the collapse in prices. It doesn’t. The ‘bubble’ is the inflation of prices beyond reason. By the time the collapse comes the damage is already baked in, falling prices are a correction of the problem, not the problem itself.

Both Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have been on the march against a housing bubble for years, aware how low rates and loose lending standards in the United States ignited a boom and bust there.

Well, Carney and Flaherty have definitely been ‘warning’ of consumer debt levels for a while, but government policies like following the US into 40 year zero down mortgages didn’t help to prevent a housing bubble.

The central bank has held rates low since the global financial crisis because growth remains tepid and global woes weigh on Canada’s export market, and Canadians can find a five-year mortgage rate below 3%.

Meanwhile in the states you can lock in to a 30 year mortgage for 3.35%. In fact, while house prices in the US were correcting, interest rates were falling as well.

But the government’s gradual tightening of rules for borrowers — a firm admission that the market was hotter than anyone was comfortable with — has taken some steam out of the market, and economists, like Carney, seem to believe a soft landing may be at hand.

“We’re encouraged by the fact the level of housing starts has come down to slightly below demographic demand, as we see right now, there’s still more adjustments to go,” he said in testimony to Parliament last week. “We’re encouraged by the evolution of house prices in a number of markets. We’re on the path to a balanced evolution of the household sector and we all have to continue to be vigilant.”

Ok, we’ll continue to be vigilant then.

Some people express a lack of faith in current house prices by delaying buying or moving to better economic climates.

Others might make a friendly wager with a co-worker that house prices will be lower in 2014 than they are in 2013.

But how confident are you that a market correction will occur not just in Vancouver, but all across Canada?

And even if the national market corrected sharply do you think that would have much impact on our banks or would CMHC insurance protect them from any dramatic losses?

Do you really think a housing market crash would have as much effect on our economy as it did in the USA?

Would you be willing to bet 95% of your assets on the likelyhood of such an occurrence?

Vijai Mohan has made an all-in bet against Canada.

The founder of a small San Francisco-based hedge fund called Hyphen Partners LP has staked 95 per cent of his investors’ assets on a wager that the country’s housing market and banking sector are about to come apart at the seams. Mr. Mohan has amassed large short positions on Canadian bank shares and the loonie, betting their values will fall sharply.

“Canada faces two risks,” said Mr. Mohan in an interview. “Very few people are looking at those risks simultaneously. That collectively presents a lot of opportunity” – for someone looking to profit from Canada’s misfortunes.

Read the full article over at the Globe and Mail.

It’s not just Vancouver.

Across Canada the condo market is looking a little peaked.

If this is a party the keg has run dry.

Toronto and Montreal are slamming the last of the jager and slurring. Vancouver is puking in the corner.

The last time we saw Whistler they were snorting white powder on the roof and screaming they could fly.

The hang-over for this one is gonna be a bitch.

It’s evident that the condo markets in Canada’s largest cities are in the midst of some sort of correction. That final chapter on this has not yet been written.

Here’s some advice. For investors, now that the condo party appears to be over, it’s worth wondering if anyone will be left with a hangover. If history is any guide, a hard landing in the condo market tends to hit those holding the financing on condo projects first and foremost.

That’s from this Globe and Mail article by Ben Rabidoux.

If you’re flustered by the Paywall at that site and you have some time downtown in the afternoon you may be able to hear it from the author himself.

Ben is doing a talk from 4 – 5pm at Canada place today on the future of the Canadian real estate market. Free pre-registration is required and we haven’t heard if there are still tickets left, but it’s worth a try if you’re interested in this subject.

Last October a building in North Van offered a $100,000 price drop guarantee.

Yesterday a reader with the handle Not much of a name updated us on how that’s working out:

I just got an update from one of my favourite condo buildings in North Van, The Kimpton. This is the development that was offering the $100k “Price Drop Guarantee” back in October. Fast forward six months and a unit came through as a sale yesterday.

Original asking price – $750k
Listed price in Jan – $650k
Sale price – $575k

That’s $175k in six months.

If you’re looking to buy a condo these days would a ‘price drop guarantee’ soothe your worries about overpaying or would you rather just have a ‘free’ car?

Submitted by Nom

A few of you have already pointed out this article, but it’s worth a read if you haven’t seen it.

It’s a problem when Vancouver condos sell but the lights stay off

There are a number of ways you could address the problems created by a speculator driven housing market, but no move to do so yet.

Here’s one point from Sandy Garossino about the kind of units we’re building downtown:

“I think we are creating a form of housing that is perfectly suited to speculation. It couldn’t be more suited to speculation.

“They are completely interchangeable, one suite is like another suite. This is the kind of thing that drives easy trading. It’s not completely liquid, but it is a lot more liquid than say a house on a lot. So, from a policy standpoint, what we should be doing is looking at the kind of housing that speculators don’t like.

“The public policy from my perspective should be to cool that market, because it’s driving market confidence. Market confidence should match market conditions.”

Vancouver house prices have been falling for the last year, but they saw a small bump last month.

So have prices hit bottom?

And what about the national market?

For one view on what the future holds you might be interested in checking out the 2013 World MoneyShow Canadian Real Estate presentation happening next week at the Vancouver Convention Centre.

The last time Ben Rabidoux and David LePoidevin put on this show it got a fair amount of favorable feedback from commenters here. If you missed that presentation here’s your chance to catch it again.

The show is free to attend but requires pre-registration. It will be held downtown at the Vancouver Convention Center next Thursday the 18th from 4-5pm.

If you attended the last presentation feel free to leave your feedback and thoughts in the comment area here.

The Vancouver Observer has some good articles from the Real Estate trenches.

This one looks at what it’s like to shop for your first apartment in Vancouver.

What does $350k get you?

Not insuite laundry.

She lined up four apartments, all under $350,000. The cheapest is $250,000. None of them have ensuite laundry. If you think that giving someone a third of a million dollars would get you a washer/dryer, then clearly you’ve never apartment-shopped in Vancouver.

East Vancouver is heating up, because nobody who works for a living can afford to buy in the West End anymore. Rising rents make an investment property in East Van a more viable option than it once was, though proper houses remain out of reach for anyone on a Canadian wage. This keeps the pressure up in the apartment/condo market.

My Realtor says that the sales market is slower than it’s been in a long time: properties will sit for an average of 70 days. Still, there are vacant units that she won’t touch with a ten-foot pole: “I’m afraid to sell in Olympic Village, to be honest. I steer my clients away.” Dead neighborhood, small units, renovations that “probably won’t stand the test of time”.

Read the full article here.

Normally spring is a busy time in the real estate market.

Sales rise, prices rise.

That’s normal.

What isn’t normal is when usually optimistic Real Estate organizations and banks start predicting falling prices.

Down is the new normal.

Central 1 Credit union economist Bryan Yu says last year hit a 12 year low in sales and the coming year is predicted to be bad with continuing drops in both sales and prices:

He expects resales will fall another four per cent this year to 31,500 while the median price, the midpoint between highest and lowest, will slide six per cent to $474,000.

Yu says “subdued immigration, stagnant employment growth and the most recent round of mortgage insurance rule tightening will weigh on purchasing… biting particularly hard in high-priced Greater Vancouver.”

Full article at News 1130.