Real estate market sturdy but cooling.

There’s an article in this weekends sun about the Canadian housing market slowdown titled Housing market still sturdy, but cooling. Sort of like a casserole, perhaps soon it will be cool enough to eat without getting burned?

The housing market in Canada is holding up better than in the U.S., but it is cooling and will cool further heading into the new year, analysts said Friday in the wake of a stronger-than-expected housing construction report.

Almost all of those new starts are apartments and condos in the prairies and atlantic canada. In BC housing starts declined by 7.9% compared to last year. J.P. Morgan economist Ted Carmichael is quoted in the story with reasons that the Canadian housing market shouldn’t be in as much trouble as the US market. He mentions that “mortgage rates at large Canadian banks have moderated recently, reflecting the decision by the Bank of Canada to keep its trend-setting rate steady” and:

…the pace of Canadian housing construction has slowed much less than in the U.S., he added, noting that construction in November here was the same at it was a year earlier, while south of the border construction has plunged more than 27 per cent over that time.

Another report, released earlier this week, suggests that the Canadian market will not suffer the same fate as the U.S. market, with the latest barometer of building intentions _ building permits _ still on the rise, even though the increase was also limited to multiple-unit housing.

I wonder what the gap between a building permit or start date and a buildings completion or move-in date? I would assume it must average around a couple of years for the whole process. Assuming I’m not way off, how clearly can anyone predict market conditions in two years?

Tiny rooftop condos


This is an interesting design and apparently they are available to buy now. The loftcube is a semi-portable living space designed to be air dropped onto empy rooftops and make use of that wasted empty sunny space. I wonder what the city would say if you set one of these up on the roof of your apartment building?

There are two models, one is 420 sq feet and the other is 588 sq feet priced at $USD $136k and $180k respectively.

We’re richer ’cause we owe more.

According to this canwest article “Home is where the debt is”. Canadians are wealthier than ever, but carrying a record load of debt. In 2005 average canadian net worth increased by 1.4 times what it was in 1999, while our debt load increased by 1.5 times in the same period.

So we’ve got more money, but we also pay more bills.

If the amount we owe keeps growing at its current rate compared to our incomes, we’ll have to invent new types of math to keep our economy going.

Home is where the debt is with three-quarters of this debt taking the form of mortgages. The median value of mortgages in 2005 was up 17.5 per cent from 1999, when it was $76,600.

The second largest contributor to the increase in debt load was lines of credit, which more than doubled during the six-year period to roughly $68 billion. About 3.3 million families in Canada reported having a line of credit debt in 2005 and the median amount has jumped from $5,800 in 1999 to $9,000 in 2005.

Cars and student loans were also big, and increasing, sources of debt, Statistics Canada said. Credit card debt also placed a burden on an estimated 11 million families.

I sure wish they broke those studies down into a smaller focus. I would be very curious to see what Vancouver’s numbers look like compared to other parts of Canada.

UPDATE: I just found this article in realtytimes from last April that talks about Vancouvers deteriorating affordability problem and mentions this little statistic:

..B.C.’s provincial savings rate hit an all-time low of -7.9 per cent in 2004 “and likely retreated further since then.”

Thats the average for the entire Province, not just Vancouver, and its the worst savings rate /debt load in the country.

November 2006: Vancouver Price Drops

Well its the slow time of year and a bit of a wierd month as well with muddy water and snowstorms, but the Real Estate Board of Vancouver has release stats for November and we’re seeing prices coming down in a lot of sectors. A few of the biggest price drops were:

Single Family Homes: Vancouver West (-4.1%) and West Van (-7.7%)
Apartments: Maple Ridge (-9.3%), Vancouver West (-7.5%)

So maybe now is the right time to buy that House in West Van or Apartment in Maple Ridge.

VHB created the handy Price RE/set graphic* shown above to visually track where we are historically on the price rollercoaster. Looks like November saw prices drop back a few months to about what they where in July 2006.

Some people think that this is the start of a softening market with prices dropping steadily for a while like they are in many places in the US. If this happens to be true, and it follows past trends for Vancouver House Prices it could be a while before it turns around. Previous drops from peak to trough have lasted anywhere from a short term of 1 year to several years of steadily dropping prices.

Personally I don’t believe that would be reasonable. I have been told that this time it is different, and assured that there will be a steady supply of people with ever increasing buying power to keep making our prices rise higher and higher until they reach my prior prediction of $3,000,000 for a 600 square foot condo in 2010.

UPDATE: There’s an article in todays Sun that take a suprisingly negative look at our market. under the headline Could big price drops be approaching? they look at the history of Vancouvers ups and downs and include some very negative possibilities:

By Gartman’s estimate, in the current cycle a Vancouver detached house rose from $340,000 at the last trough in the winter of 1998-99, reaching nearly $800,000 this year.

“If the peak was made earlier this year, and if history is any guide to us,” and Vancouver prices decline by the average of the last three cycles, Gartman said it could take 25 to 30 months to go down the trough, and 65 to 70 months to see a new peak.

Based on past experience, Gartman added that the drop could be in the order of 28 per cent, taking that $800,000 house down to $575,000.

*Graphic stolen and re-used without permission. I have assembled a crack team of legal ninjas to defend against any legal action VHB attempts to pursue.

L.A. California = Vancouver BC?

There’s an interest post over at Realestatetalks.com remarking on the fact that Property prices in Vancouver appear to be on par with L.A. even though rents and incomes here are lower. The poster gives a few examples and is interested to hear what investors think about this situation.

$250,000 buys a bachelor condo suite in downtown Vancouver, and it buys a bachelor suit in West Hollywood.

$300-$350,000 buys a 1 bedroom condo suite in West Hollywood, Wilshire, Santa Monica, which is what you will pay for the same condo in downtown Vancouver.

$2 million buys an ocean front Malibu half-duplex beach property (entry level price). In Vancouver, the same shared ocean front half duplex on Pt. Grey Road cannot be had for $2 million. Recent sales I’ve seen there are in the $3-4 million range, which makes Pt. Grey more expensive than Malibu Beach comparables. And in Malibu you get Brad Pitt and Jenefir Anniston as your neighbours!

Entry level single family home (old timer) in Larchmont-Adjacent neighbourhood of Hollywood costs $800,000. The same cost of an entry level home on the West side of Vancouver/Dunbar area.

All comparables that I could see suggest LA prime real estate matches very closely with Vancouver prices across the board. Some of the higher end properties in LA are less than what you’d pay in Vancouver.

Hopefully they will get some informed responses to this, I was quite suprised to hear that Vancouver prices are close to L.A. prices. Is that true?