The end of a sellers market.

A more detailed article today in the Vancouver sun about listings, sales and prices in Septembers real estate market in Vancouver. This article starts with the statement “The sellers’ market in Lower Mainland real estate is coming to a close.”

Cameron Muir of the CMHC makes the comment that “The asking price of many home sellers is getting to the point at which fewer and fewer buyers can pay”, but says that it this point (four months of sales decline) its not a signal of any kind of “significant market correction”.

However, Tsur Somerville, director of the centre for urban land economics and real estate at the University of B.C.’s Sauder School of Business, said the trend in sales is a sign the Lower Mainland market “is clearly putting the brakes on. But it’s too early to say how much.”

Somerville said real estate markets pass through a balanced period when they are rising from depression to overheated, and will also hit balance, or “equilibrium” on their way back.

“Since [the market] has been very overheated, it’s quite reasonable to go back to balance,” Somerville added. “The question is, are we going to stay there or keep going?”

Somerville wonders whether the psychology of buyers is shifting and more of them are focusing on negatives rather than positives, such as cost overruns for the 2010 Olympics. Somerville said buyers might also be looking at the poorly performing U.S. housing market and worrying how that might affect B.C. Whether it does or not is immaterial, he added, “because psychology matters.”

Anecdotaly, I’m finding that people around me no longer view real estate in the lower mainland as a ‘sure-bet’, In fact- I think I’ve heard expectations ranging from a dip to a crash from more than 10 different people in the last couple of weeks. Is this the end of the sellers market in Vancouver real estate? What will a transistion to a buyers market look like? Or will we find that sought for balance that saves us from a crash and enables more people to buy?

What are you hearing from people on the street?

September 2006: Listings up, sales down

September is the fourth month in a row that real estate listings have gone up while sales have gone down according to this brief story in the vancouver sun.

The number of sales in the greater vancouver area are down almost 25% from september one year ago, while the number of listings are up 11.4%. Fraser Valley saw similar numbers with a 23% drop in sales and a 19% increase in listings.

“Rick Valouche, Real Estate Board of Greater Vancouver president, said the figures show the region is “moving towards a balanced market.”

Does anybody know what a balanced market is? What years would the real estate market have been considered ‘balanced’ in Vancouver? What effect does ‘balance’ have on prices?

Rob Chipmans real estate numbers

I’ve only recently discovered Rob Chipmans real estate investment blog – it’s an interesting site which offers something that can be hard to find anywhere else: constantly updated current numbers of property listings and sales in the vancouver area. I don’t think that any one days numbers are useful by themselves to give insight into whats happening in the vancouver market, but as a rolling snapshot its a great resource.

Robs commentary is also very informative – He maintains a balanced perspective on the market and understands that there are oppourtunities to be found in both up and down markets. If you’re interested in the minutae of the vancouver real estate market and you like numbers its definately worth checking out his blog.

factoid: Spellchecker replaces ‘chipman’ with ‘chipmunk’.
conspiracy theory: Rob Chipman is related to VHB.

Should I buy a leaky condo?

Lately I’ve been recieving a lot of mail asking for advice on specific issues.. I’d like to take this time to proclaim my non-expert status. I have no way of foretelling the future, if I had that ability I’d be too busy swimming around in my money bin to post here.

The most recent question to come in is from someone considering the purchase of a previously leaky condo unit that has been repaired and has the standard warranty. Here’s the concern:

“The development is in Coquitlam and was repaired last year to a level that it has the 2-5-10 warranty. My concern is in the design of the building which doesn’t have overhangs in some areas and has a flat roof in some areas. Should I be concerned with this?”

Most conventional wisdom I’ve heard says to stay away from buildings like this, but I have a feeling that some of the people reading here might know more about this subject than I do, so therefore I submit this topic for discussion – Are flat roofs and lack of overhangs on a repaired leaky condo a dangerzone? Or are previously leaky condos a good way to get into an overpriced market?

How will a US slowdown effect Vancouver?

There are a couple of articles in today’s Globe and Mail that are interesting.. The first is about a report from National Bank Financial that says US house prices could drop another 10%. This report disagrees with the National Realtors Associations chief economist David Lereahs claims that “This is the price correction we’ve been expecting – with sales stabilizing, we should go back to positive price growth early next year”.

Stéfane Marion, an economist at National Bank, disagrees with the NAR’s statement that the faltering U.S. housing market has hit a trough and prices will start climbing again. “In our opinion, this forecast is way too optimistic.”

“…rising interest rates, higher house prices and surging costs for heating homes have triggered a severe slowdown. In recent weeks, the housing correction has become the dominant topic of conversation, fuelling talk about a possible U.S. recession.”

The second article examines what impact a U.S. recession would have on Canada:

“Canada sits ominously at the top of a list compiled by Merrill Lynch economists of countries that are most dangerously exposed to the slowing U.S. economy. After Venezuela, this country leads the world as most dependent on the U.S. economy for its well-being. And the United States, as becomes more evident with every new economic report, is in trouble.

Over at HSBC PLC, economists have gone through a similar list-making exercise, and they, too, found that “Canada is at the top of the tree” in terms of exposure to the weakening U.S. economy, surpassing Mexico and Latin America.

Merrill Lynch believes the rest of the world has enough momentum to pick up some of the slack left behind by the United States, while HSBC believes the U.S. will drag down most of the world with it. But they agree that Canada — with its open economy, its proximity to the U.S., and its dependence on trade — is more vulnerable than pretty well any other country to a U.S.-led global slowdown.”

It’s not all gloom and doom though – both reports suggest that even if the US economy tanks the Canadian economy may be able to get through with just a few “bumps and bruises”.

“..consumer demand and business investment are expected to remain strong, fuelling the Canadian economy from the inside, instead of relying on the global economy for strength.

The U.S. slowdown could change that momentum, but it will take years to slow down domestic demand, said Merrill Lynch’s chief economist in Canada, David Wolf.”

But what impact would this scenario have on the Vancouver housing market? How much are we counting on property values to be driven by future demand from outside Vancouver?