Vancouver Condo Info

A dropping US dollar, a credit crunch and a US housing market collapse. Does it all add up to a buying opportunity for Canadians in the US?

Just a short drive south of the Washington State-B.C. border sits the Horizon at Semiahmoo Resort community, a 650-home development spanning 200 acres nestled on the shores of the Strait of Georgia. When the developers began planning the project, they figured that about half the homes would be snapped up by residents of nearby Seattle, and the other half by Canadians.

That was before parity became a buzzword. Now it appears as though more than 85 per cent of the residences will be sold to Canadian buyers, according to Vince Taylor of Pilothouse Real Estate Inc. in New Westminster, B.C.

“When the magic parity hit the other day, our phones started to ring,” he says. “Everybody wants to find U.S. real estate. The Canadians are coming over the wall. They didn’t build the wall big enough.”

With “nothing more than the pesky border” separating Semiahmoo from Canadians looking for an attractive “green” community for a summer home, Horizon has become coveted real estate. The average price of a house in Semiahmoo is about 50 to 60 per cent less than a similar home in nearby White Rock, B.C., Mr. Taylor says.

My favorite quote from the story: “We always put down 20 per cent in Canada, so what do we care?” Mr. Taylor says.

Uh.. been to Vancouver Mr. Taylor?

I’ve seen Seattle held up as an example of how the west coast is immune to the housing downturn in the US, which means that our own west-coast city is immune to any housing downturn as well.. unfortunately for that example, house prices in Seattle have been dropping just recently falling lower that the previous year for the first time since 2002:

Geoff Pfander put his Wedgwood house on the market in mid-September.

“I’m trying to have faith in Seattle,” he said at an open house last weekend. “I think (buyers) just have more choices now so they get to look around more.”

To stand out in a market with more and more homes for fewer and fewer buyers, home sellers are reducing list prices, offering special financing and entering potential buyers into drawings for a bottle of champagne if they’ll say what they think of a house.

Teri Daligney held open houses last Friday, Saturday and Sunday at a West Seattle home she and a partner remodeled and put on the market at the end of July.

“I live three hours away, and I want to stop driving,” she said, noting that they had only just finished renovations.

“We get tons of people coming in and looking, but nobody who’s serious,” Daligney said. “I just think they’re scared.”

Real estate professionals said some potential buyers are jittery, while some sellers have unrealistic expectations for prices.

What’s worse, irresponsible owners or irresponsible renters? There’s an amusing article in the Real Estate journal about the way the speculative boom down south went sour when the market turned, spawning complaints from residents who now live in neighborhoods with absentee landlords.

“I like to know my neighbors,” says Lyletta Robinson, who says she has had disputes with some of the tenants in her 18-unit condo complex in Chicago’s Woodlawn neighborhood. “I like to know who’s coming and going out of our building, and it’s difficult to do that with renters.”

Of course, plenty of renters cut their grass, take in the garbage cans and turn down the music at 9 p.m. And not all homeowners are model neighbors. Denise Bower, of Community Management, Inc., which manages 122 developments around Portland, Ore., says renters are often more responsive to complaints because they know they run the risk of losing their leases if they don’t. “I have more problems with owners, by far,” Ms. Bower says. “They get stubborn.”

No, not OUR paradise, but down south in California where the slumping market is causing Vancouver developer Nat Bosa to delay building the first high-rise project in Orange County.

“I was supposed to start last year,” Bosa added, “but I’m probably not going to start them until the middle of next year.” Bosa said San Diego, where he is also building condominiums, is also at the bottom of the real-estate cycle, and “I’ve seen quite a few of them since the ’70s.”

He is not alone. Other developers, including Canadian firms that went south of the border to jump into hot U.S. markets have also put projects on hold while times are tight.

Orange County’s condo market exploded after Bosa Development started the Marquee project, the Orange County Register said this week. However, the Register reported that some 17 of 37 proposed highrise condo projects might be delayed due to slumping markets.

Bosa added that the collapse of the American subprime mortgage sector has compounded some of the market’s difficulties, making it harder for buyers to get financing.

“Getting a mortgage three months ago was like a walk around Stanley Park,” Bosa said. “Getting a mortgage now is more like walking the Grouse Grind. It’s tougher.”

Marco sent in the link to this story in the G&M about the US market where foreclosures have reached a record high for the third consecutive month (now at .65 percent of all mortgage holders) with signs that more are on the way:

The delinquency rate, which tracks the number of people who are behind in their payments but have not yet entered the foreclosure process, was also up sharply during the spring, rising to 5.12 per cent of all loans, up nearly three-fourths of a percentage point from the same period a year ago.

Doug Duncan, the MBA’s chief economist, said the worsening performance was driven by two factors — heavy job losses in the Midwest states of Ohio, Michigan and Indiana and the collapse of previously booming housing markets in California, Florida, Nevada and Airzona.

The interesting thing about those ‘previously booming markets’ is that as far as I know they weren’t hit by any economic shocks, they simply collapsed under their own weight and suddenly ran out of demand.

Analysts said the problems in the formerly red-hot housing markets of California, Florida, Nevada and Arizona reflected in part speculators walking away from mortgages they can no longer afford.

During a five-year housing boom, the prices in these areas surged, creating what many analysts have described as a speculative bubble as investors bid up the price of homes hoping to quickly resell them for a profit.

Coincidentally this is also the third consecutive month that Vancouver has neared record sales volume.

We’ve talked about this subject as recently as last weeks post on local stoned construction crews, but there’s an article on MSNBC about the problems caused by shoddy boom-time home construction in the US, with some blaming the high number of foreclosures partly on that issue:

“Everything you read says that the rise in foreclosure has to due with subprime lending,” says Nancy Seats, president of Homeowners Against Deficient Dwellings, a nonprofit consumer protection group for homeowners dealing with defective construction. “But [defective construction] absolutely has something to due with the rise in foreclosures. There were absolutely investors that pushed up the price of housing, but there is no question that there are home buyers that were taken in and scammed big-time.”

So will our experience with the Vancouver leaky condo debacle protect us from a similar problem or should we be taking an extra close look at construction quality during our own boom?

Dear powers that be,

My investments aren’t working out the way that I hoped they would and now I’m in a bit of a tight spot financially. I’ve got to tell you this has shaken my confidence in the system a bit, but if you could provide me with a bailout I could get back on my feet. I have a foolproof plan to get caught up on my bills, I’m going to buy a bunch of playstation 3’s and sell them on ebay next Christmas. After all, everyone wants a playstation 3 and I hear they’re a rock solid investment.

Sincerely,
America

Here’s whats happening right now in the “other” Vancouver:

According to the latest report from “benchmarks,” a service of Riley & Marks appraisers in Vancouver, sales of new and pre-owned homes were off 19.3 percent last month with just 719 homes sold, the lowest number for July in five years. But only in the past two months has the median monthly sales price been lower than a year ago, down 2.9 percent in July from 2006.

So is this a buyers market? “In some higher-end categories of $350,000 and up, maybe.”

There’s an article in the New York Times about adjustable rate mortgages and their impact on the US housing market:

House prices will need years to work off their irrational values, more people are going to lose their homes and Wall Street can probably look forward to some more nasty surprises.

In fact, the mortgage meltdown has arrived at something of a turning point. So far, most of the loans gone bad were among the worst of the worst. Some were based on outright fraud, either by the lender or the borrower. In many cases, buyers were never going to be able to make their monthly payments and were instead banking on a rapid appreciation in home values.

But the pool of people falling behind on their house payments is starting to widen beyond this initial group, and adjustable-rate mortgages are the main reason. Starting in the spring of 2005, these mortgages began to get a lot more popular, largely because regular mortgages no longer allowed many buyers to afford the house they wanted.

The drop in the US market so far has happened before the bulk of adjustable rate mortgages jump up to their new rate. According to credit suisse the peak mortgage reset will happen in October when more than $50 billion worth of ARMS will switch over to their new rate for the first time.

There’s an article on MSNBC today about the ongoing US housing market woes:

Housing developers are being squeezed by tighter lending standards for borrowers trying to get mortgage loans. In response to weak demand, developers are cutting prices and offering buyer incentives to cope with a mounting supply of unsold homes, the National Association of Home Builders said Monday.

The trade group’s housing market index, which tracks builders’ perceptions of current market conditions and expectations for home sales over the next six months, fell to 28, the lowest reading since February 1991, the NAHB said.

So much for David Lereahs thought from May 2006 that ‘this may be the bottom’ of the US housing slump. I have a feeling if economic reality hits the Vancouver real estate market you’ll be hearing a lot of that from local ‘experts’, and just like bears that say ‘a correction is coming’ one day they will likely be correct.