Earlier this summer it seems like everyone I talked to about real estate thought there was only one direction prices would ever go – Up. Several co-workers we looking for places to buy before they were ‘priced out’ of the market, and everybody knew somebody who’s condo had gone way up in value and of course no one wanted to miss out of the money train. But lately things seemed to have changed.
Yesterday the topic came up at work and the majority of coworkers are now expecting a crash or ‘correction’ – this is a dramatic shift from just 5 months ago, within the same group of people. A few people who were home shopping in my office bought this summer, and the one that hasn’t has an ‘absolute top price’ for a condo that is more than $100k less than todays prices – he’s interested in buying, but at todays prices he’d prefer to rent and be able to take time off to travel and snowboard. Everybody else either already owns or isn’t interested in looking to buy.
I would have taken this discussion as an isolated incident, but then I saw bc_cele’s comment over at the Vancouver Housing Blog mentioning a very similar experience from the very same day, and more and more I’m running into people with negative opinions on real estate in vancouver – from dissapointment at being priced out to downright ridicule of the market. With dissapointing sales numbers in July have we seen the peak of the market, or will the August numbers jump right back and start climbing again?
Looking for a Condo? Something a bit unique? Something that really stands out? Well you’ll have to go to New York to get it, and prices start at about $29 Million USD per unit. Just don’t settle for the second from the top, you’re better than that.
A lot has been made recently of this article in the australian press reporting on a house in Sydney selling for 42 percent less than it sold for three years ago. Housing market bears are quick to point to this article as evidence that “yes, actually real estate prices DO go down, sometimes drastically”, while people more bullish on the Vancouver market point to the fact that “this is only one house out of many and the real decline in house values overall has been closer to 15 percent or so, besides vancouver is different because the olympics are coming and I’ll sell just before the crash anyways”.
But I say you’re BOTH wrong, and you’re not looking at the big picture. You’re forgetting one very important fact, and that is that Syndey Australia is on the other side of the world from us. This point is illustrated above and is the cause of a common but major misunderstanding regarding australian housing market data. First off lets look at a graph of that house price:
Looks bad doesn’t it? You might look at that price drop and get a bit freaked out about the possibility of prices dropping in Vancouver just after you buy that shiny new $400k condo right? But that feeling is caused by one common amateur mistake- you are failing to make hemispere adjustments to that data. Australia is on the other side of the earth, which is why we refer to it as ‘down under’. Before you attempt to interpret any Australian real estate market data you need to make one major adjustment, like this:
There! That looks a lot better doesn’t it? Look at that rise- It’s bold, steady and strong. Just like the Vancouver market!
This article in today’s vancouver sun says that home sales in the US this July were the lowest they’ve been since January 2004. Dropping home sales across the US have pushed the inventory of unsold homes to a record high:
“The latest snapshot of housing activity was weaker than analysts anticipated. Economists were forecasting the pace of sales to fall to 6.55 million.
“The housing sector is fragile,” said David Lereah, the association’s chief economist.
The median price of a home sold last month was $230,000 US. That was up just 0.9 per cent from the same month last year and marked the smallest year-over-year increase since May 1995. The median price is the middle point, where half sell for more and half sell for less.
The inventory of unsold homes in July rose to a record high of 3.86 million. That represents a supply of homes still available for 7.3 per cent of a month. That is the longest period to exhaust the supply of home since the spring of 1993.”
contrary to the opinion that housing exists only in local markets, these drops happened across the US – In the northeast sales dropped by 5.4 per cent, the Midwest saw a drop of 5.9 per cent while the West dropped by 6.4 percent. The South held out the strongest with a sales drop of 1.2 percent.
The concern in the US is how the housing market slowdown will effect the economy overall:
“One of the things that Federal Reserve Board Chairman Ben Bernanke and his colleagues are watching closely is the housing slowdown. If home prices and sales were to crash, that could spell big trouble for the overall economy. Thus far, Bernanke has said the market’s slowdown has been fairly orderly and smooth.
Lereah said he still expects a “soft landing” for the once high-flying housing sector. But he urged the Fed to leave interest rates alone and refrain from bumping them up again – as some analysts have said is a possibility.”
Will we be able to make enough money off of the olympics to keep a frail US economy from effecting Vancouver?
So Vancouver is the most expensive city in Canada and getting more expensive – If you are renting or thinking of buying in Vancouver here’s a question for you: Are you tempted by any other cities in canada or the rest of the world? What keeps you in Vancouver – quality of life? friends and family? work? some combination of those items?
If you’ve considered moving what motivates that line of thought? The cost of living here? Increased career possibility? Change of scene?
How do you FEEL about Vancouver right now?