Category Archives: prices

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.

No sale on overpriced condo

Local rockstar realtor Ian Watt speaks truth to power in his most recent youtube episode.

Sounds like he’s getting a little frustrated with sellers who think their condo is special.

Pink carpet in the bathroom adds an easy $20k right?

Nope.  As Mr. Watt says, there may be all sorts of reasons nobody is interested in your Vancouver Condo, but the number one reason is that it’s overpriced:

Meanwhile his evil twin Ten Volt still claims to be the worlds busiest real estate agent in the world:

August 2012 Vancouver Market Outlook

B5Baxter posted this in the comment section yesterday, but the number of links tripped the spam filter and it was held up in moderation for a while.

We appreciate all market analysis and thought this one deserved it’s own post.

Here’s his summary of where we are in the Vancouver real estate market and roundup of forecasts:


I have started to put together a monthly housing analysis update that I share with interested people. Here is the most recent one:
Vancouver Real Estate Market Analysis – August 2012

July saw the lowest Metro Vancouver real estate sales in over a decade. Sales were lower than 2008 when prices saw a significant drop. And inventory has stayed near or above 2008 levels since the beginning of the year. That means that over the next few months we should see a drop in prices at least as great as we saw in 2008.

In 2009 prices recovered after interest rates were lowered and other government policies were introduced to stimulate the market. This time around there is less room to move interest rates and the federal government is signaling that they are interested in cooling the market rather than stimulating it.

The low sales and high inventory would indicate that we may be at the beginning of the long anticipated collapse of the Vancouver housing bubble.

Based on an analysis of price/rent, price/income and price/ gdp growth I am estimating that the current market is overvalued by 40-60% and we should expect to see declines of that magnitude sometime in this decade.

Average prices for detached homes in Vancouver have declined by 15% ( from a peak in February. This is the first time we have seen five months of straight declines since 1996. Some individual asking prices have declined 20-40% (see: )

The Teranet index for Vancouver (usually considered a more reliable indicator than average prices of the overall market) has not shown the same decline. It has remained relatively flat but tends to lag other indicators. The REBGV index showed a 1.4% drop since May. This would be consistent with price behavior and inventory levels in 2008 when prices started declining in the second half of the year.

This graph ( ) shows three of those metrics imposed on a graph of San Diego housing prices. I believe the Vancouver market is similar to the San Diego bubble market and the declines may follow a similar pattern.

If Vancouver prices did follow a similar trend to US prices we would see the 40-60% drop occur in 3-7 years.

Other estimates: has estimated a decline of 41% and a time to bottom of 97 months (8 years).

The Economist magazine recently ( ) stated that Canadian real estate is overvalued by 75% (this is an average for Canada, some markets like Vancouver may be higher). has estimated a decline of “about 50%” from a March 2011 peak with a time-line of “5+” years has projected a decline of 50-66%

Pacific Partners estimates a 40% decline ( )

Investment Comparison:

During the last six months Vancouver Real Estate showed annualized return of 1.6% (using the optimistic HPI). During the first two quarters of this year the non-cash portion of my own strategic allocation portfolio returned 5.2%.

Ready for a 25% off sale?

A day after the RBC released a report saying there is no condo bubble in Toronto we get a conflicting report from Capital Economics.

Not only do we have a housing bubble problem in Canada, it appears to be peaking and bursting right now.

Economist David Madani says get ready for a 25% drop in prices.

The thing people always seem to forget when it comes to housing markets is that they move SLOWLY.

Housing prices typically respond to changes in the market with a lag of five to nine months, according to Mr. Madani. He points out that home sales have already seen material declines, down 4% over the last two months. Vancouver in particular has been hard hit, with sales down 28% year-over-year.

“Overall, the willingness of buyers to pay these historically high house prices now looks to be proving fragile against the increasingly disappointing macroeconomic backdrop,” he said. “The housing bubble in Vancouver already appears to be deflating, with only Toronto defying the inevitable. Accordingly, we expect substantial declines in house prices over the next year or two.”

Check back here in two years to see whose prediction was more accurate: RBC or Capital Economics.


RBC: No Toronto Condo Bubble

Royal Bank says everyone should stop worrying about the condo bubble in Toronto.

Policy makers in Ottawa and various economists just need to chill.

There is no Condo Bubble in Toronto.

Can someone ask them about Vancouver?

There are more condos under construction in Toronto than any other city in North America, and more residential building is taking place in the Greater Toronto Area than ever before.

Mr. Flaherty’s fears about overpriced real estate, and condo markets in particular, prompted him to surprise the market last month with new mortgage insurance rules that aim to take some of the wind out of the market’s sails. He’s trying to engineer a gradual slowdown of the market, fearing that otherwise it could crash at some point.

Mr. Hogue’s lack of concern about a bubble does not mean he thinks the market will boom, however. He expects condo prices to fall by perhaps 2 per cent to 7 per cent from their peak. He predicts that a two-tiered market could emerge, with condo prices softening while the market for single-family homes is resilient.

Full article in the Globe and Mail.