Vancouver Condo Info

Yesterday we posted a link to an article about the high number of properties for sale in Vancouver. What’s possibly more interesting than the sheer number of listings in the very high number of price reductions we’re currently seeing. Yesterday Paulb shared numbers that showed 232 new listings and 56 sales, but nearly 3 times that number of price changes at 162.

We’ve seen many days where price changes have exceeded 200. Even with listings for the REBGV area nearing 19,000 Mclovin points out that we’re consistently seeing about 1% of total inventory drop their price every single day. That means about 5% of all listings in Vancouver are reducing their asking price each week.

While you’ve been watching the big milestones on the growing number of houses, condos and townhouses for sale in Vancouver (15,000! 16,000! 17,000!) there’s a little milestone you may have missed: The doubling of number of units for sale since the beginning of the year.  We started off 2010 with 8724 units for sale, which means 17,448 is the magic number.

Could we triple inventory this year?  To  do that we’d need to hit an inventory of 26,172 places for sale, which would be far higher than any year in recent memory.  Have we ever had that many units for  sale in Greater Vancouver?  The West Side has the biggest head start – they’re already close to 150% of the number of listings from January 1st.

REBGV Inventory chart created by vibe in the VCI forum.

Wow, it was just six days ago that we had a 15k party in the forum to welcome the fifteen-thousandth property available for sale in the REBGV area, and now I see that we’re already closing in on 16,000 listings.

We’ve got two regular posters here who have been providing regular updates so data addicts can watch the listings grow through the day, let’s hear it for paulb and inventory!  As of the end of Wednesday listings sat at 15,789.

At this rate there’s a possibility that we’ll add more than 2000 listings in the month of April, despite a healthy number of sales.  We’ve already surpassed the supply available at this point in the last five years.  The only year that listings growth looked anything like this was during the micro-crash of 2008 where prices bottomed out at a 10-15% loss and have since recovered.

It looks like many people think that right now is a good time to cash in that million-dollar property.  Please no pushing or shoving, we are civilized people.  Head to the exits in an orderly manner, there are plenty of lifeboats for everyone.

The REBGV benchmark house price reached $800,796 in February.  The rise in listings puts us into a ‘balanced’ market condition according to the Real Estate board.  Will we be able to maintain this ‘balance’?  I suppose it depends on how much our market is driven by CMHC support and how new rules and higher interest rates affect those margins.  Here’s some interesting math courtesy of reader bestplaceonmeth:

Based on $58,000 median household income in Vancouver using ING’s “how much can I borrow?” for 35 years (yes, 35 years – it’s what all the cool kids are doing nowadays).  Also assuming no other debts (ha ha) and a conservative $250 a month for property taxes or condo fees or both.

Prior to April 19, qualifying at 1.95% variable rate:

YOU QUALIFY FOR A MORTGAGE OF $415,270 WITH 5% DOWN!

After April 19, now having to qualify at 3.89% fixed rate:

YOU QUALIFY FOR A MORTGAGE OF $313,880 WITH 5% DOWN!

Holy foreclosure, Batman! That’s a 25% haircut off current prices!

Now let’s fast forward to the end of 2010, 4 successive 1/2 point interest rate hikes and you now need to qualify at a rate of 5.89%.

YOU QUALIFY FOR A MORTGAGE OF $244,287 WITH 5% DOWN!

That’s 41% less than 10 months ago, and we’re just getting started.

See, I told you math was fun.

Now, who wants to go out and get into a bidding war?

UPDATE: It’s been pointed out that CMHC currently requires the 3 year rate to be used, so the difference is not as extreme as the above example. DoDo1975 clarifies with this math:

A quick calculation shows that a family with absolutely zero debt making $90k a year could borrow $533,721.32 over 35 years today. All else being equal, after April that number will be $456,311.49 or approximately 14.5% less. This 14.5% is constant across all income levels.

If interest rates on the 5 year prevailing rate also go up 1.5% in the future, this translates into a 28% decrease in the amount someone can borrow compared to today.

The REBGV December 2009 stats are out and the average Vancouver House price has reached a mind-boggling $952,927 despite less than peak population growth rates.

Don sent in the information above – this chart shows Vancouver average house prices from 1977 to 2009 superimposed on a graph of the BC population growth in percent from BC Stats.  The $300k price point correlates to 3% population growth.

One thing to keep in mind is that some divergence is only natural: one percent population growth in 2009 represents more people than 1% in 1977 because we’re starting with a larger base population.  It’s still interesting to see the correlation between population growth and house prices.  There was actually very high population growth in the late 70s and early 90s that relates to those housing booms.  By the middle of the 90s this growth had real house prices nearly back up to what they were in 1981,

You can see the correlation between the housing market decline in the mid nineties and the drop in population growth.  We’ve never recovered that high rate of population growth (as high as 3% in the mid nineties).  We seem to have peaked at 1.7% in 2008.  It will be interesting to see what BC and Vancouver population growth does going forward – will ‘everyone want to live here’ or will we see a a decline in population growth with fewer infrastructure project jobs and less construction?

The Vancouver Sun is spreading the news: July sales in the Lower Mainland lept up.  Prices in Vancouver and the Fraser Valley are still lower than they were a year ago, but a large number of first time buyers are said to be moving into the market:

Lured by the correction in home prices and low mortgage rates, first-timers are jumping into buy in numbers that are now rippling across the market as evidenced in July with record numbers of sales for the month in both Metro Vancouver and the Fraser Valley.

Proof that it’s different here?  Or are these people looking forward to the same disappointment many in the US are experiencing?

Tsur Somerville, a real estate expert in the Sauder School of Business at the University of B.C. said there are signs of more stability in the overall economy, but it is difficult to see the pace of sales continuing at such peak levels.

“This is a very, very high level, and [long-term mortgage] interest rates have already started creeping up,” Somerville, director of the centre for urban economics and real estate at the Sauder School of Business said.

“It’s a wonderful, positive statement about people’s outlook for where things are going,” he added, “but it’s hard to put together the set of circumstances where sales of this level are sustainable and persistent.”

Tsur also says he doesn’t expect prices to turn around and plunge without a substantial change in rates.

Full article in The Sun.

The Vancouver Sun is reporting that the housing market in the lower mainland has struck a balance point, with sales and price rebounding from their winter lows.

The decline of Lower Mainland real estate markets, which started with falling sales more than a year and saw prices drop as the global recession developed, levelled out in May.

Metro Vancouver recorded its best year-over-year sales increase in May since February 2008 with 3,524 sales reported through the Multiple Listing Service, 17 per cent higher than the 3,002 sales recorded in the same month a year ago.

The so-called benchmark price in Metro Vancouver, averaged across property types, hit $506,201 in May, which is still 11 per cent below the same month in 2008, but higher than the $484,211 recorded in January.

Metro Vancouver’s inventory of unsold homes in May stood at 13,641, a 16-per-cent decrease from a year ago.

At the risk of repetition, I’m just going to post one of our favorite charts from Sacramento Land(ing) showing their market going through the seasons over the last three years:

And here’s the up to date version they just posted:

The discussion around affordability keeps coming up, especially with the recent drop in housing prices and lower interest rates.  Arguments for and against real estate are often rationalized based on affordability from both bulls and bears.  But what exactly does the historic and current data show?

First let’s define affordability.  It is simply the percent of household income taken up by ownership costs.   For this exercise, I followed the methodology used by RBC (http://www.rbc.com/economics/market/pdf/house.pdf) because past information was readily available.  Household income is based on published numbers for Greater Vancouver (median) and mortgage costs are based on a five year fixed rate mortgage amortized over 25 years. You may argue that this is not representative of buyers for whatever reason, but to do so would be to miss the larger point, which is to simply compare where we are now relative to the past.

Second, let’s look at historic data.  I referenced the RBC to obtain affordability percentages (rounded to 5% increments) for various years, as follows (see page 5):

Condo       TH        SFH

1986      20%      25%      35%
1990      40%      50%      70% (Peak)
1992      30%      40%      50%
1995      35%      45%      65% (Peak)
2000      25%      35%      45%
2004      25%      35%      50%
2008      40%      50%      75% (Peak)

To define the norm, I looked to where affordability ranged for most of the time (say 80%) going back to the early 80’s. The historic norms for condominiums, townhomes and single family homes have roughly fallen between 20-30%, 30-40% and 45-55%, respectively.  These ranges ignore the ‘spikes’ of low affordability at peak years (e.g. spring 2008), but also the ‘trough’ of high affordability in the early 80’s.

And finally, where are we now?  Using $60k as the median household GVRD income (used by RBC), the latest MLS GVRD benchmark prices (Mar 2009) and the current five-year fixed rate mortgage (using the ING calculator), I come up with 27% for condominiums, 33% for townhomes and 51% for single family homes.

All of those values fall near the mid-range of historic affordability.

- Dave

From the REBGV press release:

VANCOUVER, B.C. – March 3, 2008 – Residential housing sales in Greater Vancouver rose 94 per cent in February compared to the month before, with 1,480 sales registered in February compared to 762 sales in January, which was the slowest month for housing sales in 25 years. Over the past 10 years, February sales have typically surpassed January by an average increase of 53 per cent.

At the same time, new MLS® listings for residential properties continued to decrease for the fourth month in a row. New listings decreased 25.6 per cent in February compared to the previous year; 20 per cent in January; 8.6 per cent in December; and 10 per cent in November.

“There are terrific opportunities out there right now, but with property listings continuing to decrease, those opportunities may be available only for a brief window of time,” said Dave Watt, president of the Real Estate Board of Greater Vancouver (REBGV).

REBGV reports that year-over-year property sales in Greater Vancouver declined 44.7 per cent in February 2009 from the 2,676 sales recorded in February 2008. Year-over-year, those are the lowest sales figures for February since the mid-1980s.

Read the whole press release and view the stats in the PDF.

Local Realtor Paul Boenische has been providing daily statistics for the lower mainland market since the end of 2007. In 2008 he won the Georgia Straights reader choice award for “Best Realtor”.  Many of you have read his blog and seen his comments on other sites (like this one) under the name PaulB, so it is sad to see that he is leaving Vancouver for the improved quality of life in PEI.

We initially were interested in Charlottetown because we have some family there, and after researching it and visiting PEI, the vastly improved quality of life is what convinced us. Sandra and I want to have the time to be very involved in the lives of our children, and PEI is affordable as well as being beautiful.

I will miss the opportunity to work with many of you. I always got a kick out of meeting the person behind the avatar. However, I look forward to selling real estate in a market where I can more easily see value for the dollar. Selling first-time home buyers into a 200k house will feel good compared to the recent speculative mania that has infested BC real estate. And when you toss in beautiful beaches and the best golf in Canada it all made a tough decision a little easier.

You can read the rest of his farewell message on his blog.

I skipped town during the ‘Best of Vancouver’ awards party, so I never got to meet you Paul.  Best of luck with your move, I hope that you will keep us updated on how you and your family are enjoying your new home.