We just hit 20,000 listings in the REBGV and the trend would point to even more homes for sale this fall. Currently were up over 60% in YOY inventory and on track for 70%+ by month end. We saw prices decline last month and many feel prices are destined to continue moving downward. We will likely see well over 8 MOI (months of inventory) at month end compared with 3 MOI at the end of last July.
Is this a good thing or a bad thing? Does cheering a price correction make you a pessimist? I guess it depends entirely on your current position.
One thing is for certain, home prices we're growing at a rate that could not be sustained. Now our market is re balancing. I personally would not want to be holding a bunch of pre-sales right now.
What does this mean for buyers and sellers?
Sellers:
Price sharply. Don't get greedy.
Buyers:
Prepare to hold long term, and take this opportunity to negotiate favourable terms.
155 comments:
I cheer for a world where housing is affordable not just for those that already own it. Is that pessimistic?
Hah, great picture. Who would've thought we'd be at 20,000 inventory after starting at 10,000 in January? Crazy. Thanks for providing us with the opportunity to follow the market this closely Paul, it's very much appreciated.
I'm looking forward to the day when I'm paying off a mortgage and not rent, but not when the cost to own the property I want is 2.5x my rent.
Happy 20k everybody!
exactly my feeling jesse and exx. Housing is for everybody not for a few who got in early. I will not buy a house, till it makes sense financially, come what may.
Rob, you provide a great service here day in and day out. Congrats on keeping a loyal blog following and I hope you keep with it even as this gets really ugly. Employment for us right now is tough and it's gonna get a lot tougher. Every day I think about switching careers but even as bad as it is now and as bad as I know it'll get I might just stick with it.
Jeff dude, it's Paul. Thanks for the kind words. It is gonna be a tough couple years buddy, but we will be ready to ride the next wave :)
FV 11396
New Listings 158
Price Changes 77
Sold Listings 45
Hi Paul,
I've been lurking for a bit - trying to time the market in order to purchase a home.
Yes, it will be a tough wait for a lot of us that are sick of renting, but when the time comes to buy, you're on my first to call list of realters!
Awesome website = )
Happy 20K everyone!
Paul, I'm not sure if you follow Richmond much, but I'm hoping to purchase a house in the Steveston area.
Any idea if prices here will start to fall? I know inventory is building out here as well, but I don't see any decent price declines (other than 10k on the odd property).
What are your thoughts? I'm getting sick of renting....
Thanks
Lisa
I've been lurking for a bit - trying to time the market in order to purchase a home.
Don't time the market. Price the market.
No risky asset should yield less than the cost of borrowing money. When the net rental yield: (rent - taxes, etc)/price, is greater than or equal to the mortgage rate, buying makes sense. Not necessarily the best time to buy, but sensible.
YEEEEEEEEEHAAAAAAAAW! Didn't think we would get there this fast!
For auld lang syne, my dear,
for auld lang syne,
we’ll tak a cup o’ kindness yet,
for auld lang syne.
Numbers in 15. Nice dinner out without baby. :)
Looks like the board shut down very early today. Where did the listings go??
Hahaha, 20,000! BYE BYE BULLS! THIS market is TANKING with 20,000 units for sale!
I agree Paul, it looks like things just stopped... 60 SFH listings whereas we had at least 110 the whole rest of the week? 88 condo listings versus 158 for the bottom for the rest of the week? Condo inventory flat despite solid daily growth? SFH inventory up by only four?
I remember when one of my friends was going to list recently that their agent told them there was a backlog of listings. Maybe the solution to too much inventory is to just slow down the postings... make it slower and slower for people to come to market...
Generally I don't subscribe to conspiracy theories, but it does seem weird that on the night they get to 20,000 units everything suddenly stops.
Rob's take on 20K:
"and besides (all due respect and whatnot) the idea that 20k will be some sort of magic number causing sellers to capitulate is…well, there just isn’t a nice word for that kind of stinky crap."
Stinky crap it may be, but let's have some fun with it! Happy 20K everyone!
Sounds like the listing clerks decided to throw their own 20k party!
hi paul and thanks for the info/effort. curious, what is actually selling in north vancouver for sfh? seems mls is filled with places that have been "updated" and a huge pile of places in the 800-1mil price range. are these houses moving?
otherwise, i left vancouver to seek other better paying opportunities and watch the meltdown from afar hoping that by 2012, it will be affordable to buy something on the north shore with a vancouver salary. so yes, 20k is good news for me.
I love the celebratory nature of the blog tonight. It's a welcome change. I have this vision of all of us toasting champagne and cutting into a huge cake with big "20" drawn on it.
Happy 20K y'all!
Albeit we are at 20,000, this past month the listings slowed down considerably from their torrid pace earlier this year.
If past trends are an indicator, we'll probably stay around this level (+/- 1,500) until September or November with a decline towards December(expiries).
Then we start Jan/09 at a new high, we do it all over again and see how high we can go.
The listings:population ratio you guys were working on was very interesting. I think we all know what's coming down the pipe.
Has anyone kept track of the daily sales for July so far?
The MTD sales to July 25th vs. MTD sales to June 25th should give a pretty good sense for where the total July sales vs total June sales(and hence, the MOI at the end of July...).
Yeah, I track all of Paul's daily stats in a sheet that calculates MOI using various periods sales data.
1,799 sales thus far in July.
Thanks Vancouverguy - that's about where I thought we were. SO, 2,000 total for July and 10 MOI on the books?
Van Ref,
The homes that sell in this market have to be well priced and/or unique. I have been surprised to see many homes I thought would sell quickly sitting idle.
10 MOI would be really rough :0
CELEBRATE GOOD TIMES... COME ON!
"If past trends are an indicator, we'll probably stay around this level (+/- 1,500) until September or November with a decline towards December(expiries)."
I have to disagree with you there. With tighter lending (no 0 down, or 40 yr mortgages) coming in the fall, we will continue to see listings increase until the winter, especially in the next 2-3 months. Another reasoning is the fact that the MSM hasn't really focused on the story yet and many people still aren't aware of the current state of the market.
Anon, the new rules on 40 years mortgages might have the opposed effect than what was anticipated as is often the case with government regulation.
A lot of those people at the margin might decide to get into the market ahead of the rule change.
I think that is likely Dave although what's that saying about after Oct? Lights out?
Dave,
The only problem with that is most of the big leaders have stopped with the 40 year mortgages and are looking for low debt service ratio already.
My mortgage broker said she's has clients that are trying to renew into another 40 year mortgage and are being turn down. She has other clients that have gotten a mortgage in the past no questions asked and she now has fight from them.
If someone is iffy and don't have a mortgage already, I doubt they'll get
I
Paul,
I'm using the Mlxchange statistical report and I only get 874 solds this month for REBGV (attached & detached).
Is that sales number right?
Paul, is it possible that some realtors are also in denial? I still can't get my FORMER realtor to admit that I should wait to buy my first home. It's hard to imagine that he actually believes what he's telling me about slower GROWTH going forward.
I'm going to start engaging the realtors handling the mls listings I'm interested in by email. At least for those listings that are high relative to current market pices, I'd be interested to see how they justify their asking prices.
Mind if I post what I get back from them? We've still got a year or two to kill here.
Congratulations on the 20,000. Thamks Paul for the valuable service.
Regards,
arit
anon @ 12:10: yesterday I got a call from a realtor-friend that we used when we bought and sold our condo.
She's suggesting that now's the best time for us to get into the market again, because some real deals are happening. Her theory (which I assume was told to her in a report or by her managing broker) is that since so many of the places on the market will be expiring in August, that it's going to bring inventory way down, and the market's going to heat up again through the fall.
Paul: any idea if there are influential people (or reports) in the real estate industry that have been pushing theories like this one?
" since so many of the places on the market will be expiring in August, that it's going to bring inventory way down"
And that helps sales how exactly? Less.. choice.. must.. buy.. now..
So the market finally peaks this spring and she's calling for the bottom in August? That was fast.
I don't have to wonder what the reaction would be if Rob tried to pull that on his blog. Maybe the bloggers should quit trying to create an arguement with Chipman who concedes the likelihood of a major correction, and instead try to engage the kind of realtor you dealt with, via email correspondence. Post the highlights for the rest of us, and expose them.
Imagine this realtor sitting down to her computer with a cup of coffee in the morning. Opening her email to find one or two sales related enquiries sandwiched between 50 emails from WoW asking her to defend her position.
I know you said she was a "friend". Don't suppose you want to name names?
anon@12:10
i've been watching from the sidelines that past few days...but i must comment now that 20K has been met!
my husband and i moved from vancouver in 2003 - we had been renters and thought the prices were high then! now we are moving back this fall and think the prices are completely insane (obviously). it's exciting to see the tide change and knowing it can happy fairly fast! we have been in the market down here for the past few years and things change quickly. as soon as the media gets a hold of the story investor confidence will weaken and that's when things will really a downward sprial. i'm afraid anyone who has not seen this coming especially after what's been taking place in the US has had their head in the sand!
can't wait to see the july figures. great blog Paul!
My mortgage broker said she's has clients that are trying to renew into another 40 year mortgage and are being turn down.
Hello?
People are trying to start a new 40 year amortization schedule at renewal time?
Talk about living on the edge.
M-
We get reports from Muir etc. which carry the same hopeful tone as anything else we see in the papers. Managers are all different some will tell you it's gonna be tough and we will likely see some correction others will try to keep pumping the market. It is part of the job description not to create panic.
Many Realtors I know agree the tide has turned but I still see some agents that think things are about to heat up. I personally think it's gonna be a real mess for the next 2-3 years, but that's just a guess.
"It is part of the job description not to create panic. "
Even if the gullible public interpret it as a blatant lie!!!
paul, fv numbers pls.
The pricing of many new listings strongly suggests that not everyone has yet bought into the "market downturn" theory. I don't think they're right, but certainly there are realtors and/or sellers out there who anticipate more good times ahead. Good luck to them.
FV:11471
New Listings 175
Price Changes 126
Sold Listings 45
A steady climb for the FV
Ya FV's really been racking it on - started off the month at 10497.
It also looks like the occurance of 0% over-lists is becoming common now.
Paul, 20K, after the crash I will be looking you up.
TICK TOCK, TICK TOCK
I sent this to a realtor a while back on a listing I thought was overpriced.
Message: How long are you going to wait to lower the price on this unit?
You'll have to contiue to survive on ramen noodles if you don't get some commissions in soon! (sent from bcbuds)
My assuption,because all I'm doing is giving them a hard time, is for the realtor to delete and ignore. Things must be bad...
Good Morning,
The property was price reduced last Sunday to $419,000 - Virtual Tour and full slide show to be attached later today - have you viewed it?
Sharon
Really frustrated right now. Two houses I was interested in, sold. Didn't even get the chance to low ball. Unfortunately, the area I'm looking in, Central North Van, doesn't seem to be adding a lot of listings. Hope that changes soon.
If the two houses sold with their prices adjusted DOWNward, someone caught a falling knife.
It's a good thing. For you!
stilllooking, change your handle to stoppedlooking and change it back to looking in two years time and dont forget to come back and thank me for the same. ;-)
Great work, Paul.
Persnally, I am looking for the banks to tighten their credit as things turn down.
We will see what happens.
SFH MOI for GV according to Paul's stats based on last two weeks of sales is at 11.6. 8.2 MOI for condos. That SFH number is getting VERY high. The SFH MOI based on two weeks of data was at ~8 around the beginning of the month. Ouch.
nuttin in my westvan area is selling (nuttin) and 4 more houses for sale in my small walking area, over the past week (new listings)....and some price (one new one) reduced signs...
the for sale signs are like part of the landscaping now, a seemingly permanent fixture.
Mr. Paul B - based on your stats, how do the avg/median prices look for the month vs. last month?
This is a terrific site/source of info, thank you.
As far as SFH AVG goes, here's where it appears to be headed for end of this month - SFH AVG Forecast. I think condo's are going to be flat again.
my cousins rushed to lock in their mortgages as rumors circulated that banks would be raising rates early next week.
Paul,
It looks like REBGV July sales would be off by 70%+ this month compared to last year. A few more days to go...
Paul, any way of telling how many listings expire end of August ? Is it a spike ?
I think we will close July with sales off about 40% based on current counts.
I can't tell in advance how many listings will be expiring.
Hi Paul,
What were the numbers looking like yesterday?
What Paul said about the unique selling is very true. I was late in making an offer on 601 1168 Richards. New building, went for full list, fantastic penthouse. Now back on the hunt, can't find anything I like despite the 20K listings.
Was taking my dog for a run through the neighbourhood. Funny sight at 7th and Alder -- a quiet residential corner. About 12 open house signs at the one mini intersection. I did a double take when I saw that each of the signs was for a different listing!
To anonymous, above: I am curious as to why are you putting in bids for a penthouse at this time? Do you feel that the market has some upside? Do you have multi-millions kicking around, and so a decline in value is irrelevant to you? Are you downsizing from a SFH? Are you a specuvestor? Do you feel that you are in "for the long haul" and so you feel that therefore the situation currently doesn't matter that much?
I think we will close July with sales off about 40% based on current counts.
I can't tell in advance how many listings will be expiring.
July 27, 2008 9:29 AM
Paul,
Jeff and WoW on "that other site" are calling for even bigger declines.
Comment?
The only other question worth adding to schnorrer's list IMHO is:
ARE YOU NUCKING FUTS?
Jeff and WoW on "that other site" are calling for even bigger declines.
Comment?
This month the sales numbers are trending to a 40-42% drop. That's all.
...can't find anything I like despite the 20K listings...
same observation in looking for quality condos. lots and lots of cookie cutter stuff but very little that has much spark to it.
based on what has (not) happened in the US, it will be interesting to see if the good stuff manages to maintain most of its value, as it has in Boston, NYC, SF, etc.
I'm sorry that I don't share all of your enthusiasm, but I just just don't see the significance of 20,000 listings. Sure, It's a big round number, and this may very well prove to be the peak of the current market cycle. But the reality is, I still can't afford to buy a house, and prices have barely come off their highs.
What I've learned from This blog (and others) is that:
1)Prices are sticky on the way down.
2) Prices usually bottom about 2 years after a market peak.
I'll get exited when prices drop 30% to 40% and I can actually afford to buy. That may take a while.
Thanks, the other Anonymous, for agreeing that there is very little out there of interest. I've been looking for three months hoping to see some interesting distress.
Schnorrer: Yes, I have some money and I didn't make it by making a lot of mistakes. A million and a half gets you nothing interesting, which is why I'm kicking myself so hard about the Richards place. I'll pay the current price for scarcity it even if the market goes off 30%.
Macho Slob: No I'm not nuts. Who cares if you bought a Ferrari 250 GT at the top ten years ago, you bought well. Selection is far more important than timing. Go back to school.
If you want to make money here, you watch for the distressed rarities than come up that don't in a bull market, and you buy them at current price plus the bidding war premium if need be. If you don't think they're a hundred hawks out there doing this you're missing the whole point.
A price is only a price. An opportunity to own something of 'value' is a much more interesting thing, and that's the real opportunity here.
anon 9:30,
Impressed with your thoughts and further impressed that you got a mil and half sitting. Tho how long is it going to remain with you is anybody's guess. Like they say, a fool and his $ is going to part soon.
I suggest you write a book. Not sure if anybody else will buy it, but RC would love to buy the whole nucking press. You dont have to worry abt losing money there.
anon 11:00
About 2.7 million people live in the lower mainland. There are 580 waterfront properties in Vancouver harbor and there will be no more. I live on one of them. In fact it's a shrinking number as owners like Bosa buy adjacent lots. I'm guessing we'll max at about the same amount of decent penthouses.
So that's 1 scarce property per 2700 residents, with the unit number eventually going down through merging and the resident number going up, maybe fast. Plus we're headed for the mother of all inflationary environments.
I don't care if I take a paper loss of a few hundred grand (think inflation) when all the other numbers are going the other way.
And all hype aside, there's no denying Vancouver is the newest and only true postmodern city on Earth.
Anyway, I just visited this site looking for trends and dropped in on this doomsday blog. Good luck everyone.
"There are 580 waterfront properties in Vancouver harbor and there will be no more. I live on one of them...And all hype aside, there's no denying Vancouver is the newest and only true postmodern city on Earth."
I too suggest you should write a book, and call it "One of the greatest fools"..
Bulls, don't delude yourself into thinking everything is okay. We have 20,000 listings, and sales are dropping off a cliff.
This market is in serious trouble. When our local MSM comes around to spreading the doom and gloom stories, the panic will only grow from there.
There may be only a limited number of waterfront properties, but two things to keep in mind:
1. People will substitute down if there are large price discrepancies. No mkt is self contained.
2. You can still rent waterfront properties less than you can purchase at. Renters are pricing in the scarcity at less than purchasers. Unless there are purchasers unwilling to substitute, you are still stuck at the same determinant of fundamental value.
Anon said: "When our local MSM comes around to spreading the doom and gloom stories, the panic will only grow from there."
I'd like know when this will happen? Do you think they will pick up the 20K story or is it not relatable enough for the general public? Will it take a lot more doom to get the media going? I personally hope to see some coverage soon.
People will substitute down if there are large price discrepancies.
Most people will, for sure, and we'll get the inverse of price compression as it happens. But the inverse of price compression means that - by definition - the properties with more inherent value will deflate less than the ocean of cookie cutter crap out there.
As usual, the MSM will get a hold of the story only when it's too late. Obviously, the fact that a lot of their advertising revenue comes from real estate has NOTHING to do with it... /rolleyes
Here is some media coverage from today... CREA still putting as positive of a spin on it as they can. Saying still not as bad as the US.. Funny because the US RE association went through the same downplay process 12 months ago.
http://www.canada.com/vancouversun/news/business/story.html?id=c2fa2c9a-9514-4c89-8447-7c8578d1d9a8
"About 2.7 million people live in the lower mainland."
no, it's more like 2.2 million.
"Vancouver is the newest and only true postmodern city on Earth."
This is postmodern in the Derrida sense, i.e. meaningless bullshit sucked up by second-rate minds who prefer empty gobbledigook to proper formal reasoning based on fundamentals? I think I agree...
"the properties with more inherent value will deflate less than the ocean of cookie cutter crap out there."
I would not construe this to mean that properties with "inherent value" will be immune to price drops. It's not like there was no premium on luxury during the boom. Price compression between neighborhoods was only around 10% or so.
"About 2.7 million people live in the lower mainland. There are 580 waterfront properties in Vancouver harbor and there will be no more."
I just want to ask: if there are 2.7 Million people live in the lower mainland, why are you saying there are 580 waterfront properties in Vancouver harbor? Shouldn't you compare the lower mainland population with water front properties in lower mainland?
Also, why on earth do you think that people would love to live in Vancouver harbor rather than somewhere else that also have ocean view and are 50% less expensive? Let's face it, Vancouver harbor is nice, but you also have to deal with constant traffic noise, drugs addicts, and oh, for the ocean front property, don't you hear the very loud noise from those sea planes? Just think about it.
Anonymous
"And all hype aside, there's no denying Vancouver is the newest and only true postmodern city on Earth."
There's no denying it because it's a bunch of nonsense words strung into a sentence. There's no point in denying it because even if it meant anything you've failed to draw a connection between your gobledygook and your argument.
There's also no denying that, "Vancouver is the gnarfliest of all jizlet annzogged fiblenarblies."
"There are 580 waterfront properties in Vancouver harbor [sic] and there will be no more."
While I'm calling you out on your BS. What is your definition of Vancouver harbour? English Bay, Burrard Inlet, Coal Harbour and False Creek? All the way to Port Moody and Indian arm?
There is no geographic location named "Vancouver Harbour" in or around Vancouver so the actual number you should be listing is 0. As in, "There are No waterfront properties in Vancouver Harbour."
Given that you don't even know the names for what you're talking about why should anyone believe your 580 number means anything (not to mention that you got the population of Vancouver wrong).
You're a little more literate than ThumbsUp but you're at about the same level of logic skills. You two should get together and buy properties off of each other. If you keep raising the prices as you exchange properties maybe you can keep the bubble going!
While I'm calling you out on your BS.
Think about it Drachen - if waterfront is defined in the strict sense of the word - meaning you own right down to the seagull poop - there are extremely few such properties in Vancouver. There are none - zero, zilch - in False Creek. There are none - zero, zilch - in Coal Harbor. There are none - zero, zilch - on English Bay.
Etc etc etc.
You are nothing if not consistent in your "shoot first, think later" approach.
How are today's numbers behaving, Paul? I haven't heard a thing from my VOW automatic e-mail alert...
About 2.7 million people live in the lower mainland. There are 580 waterfront properties in Vancouver harbor and there will be no more. I live on one of them.
Then why on earth are you posting about it here instead of enjoying it and the view?
Actually, I think Vegas is the quintessential post modern city.
It is a pastiche of kitsch. It constantly reinvents itself, assembling references to cultural icons, and reforming them in a hyper-real veneer. It strives to be uber-real, hyperactively invented, designed and formed. At once ironic and genuine, it pushes simulation to its logical extreme. There is no sense of actual place -- it has uprooted itself from geography with plenty in the midst of the desert, miles from any "real" place.
Anyway its real estate market has completely tanked, too. Post-modernism doesn't mean post-economic-fundamentals.
Check this out guys: The Tyee put something together regarding the 20k listings and many of YOU are quoted!
http://thetyee.ca/Mediacheck/2008/07/29/HomeSlide/
The Tyee writes:
"Dozens of commenters wished each other "Happy 20K!!" on both blogs. Here is a sampling of what else they said:"
No name recognition for me, who thought of the idea of us wishing each other a "happy 20k", making it festive like a birthday/new years, and blogged it first... just get bunched in as "dozens of commenters"... sniff... I thought it was cleverly facetious...
Cue violin music :-(
- Schnorrer (aka Michael/Newguy Vancouver)
There's also no denying that, "Vancouver is the gnarfliest of all jizlet annzogged fiblenarblies."
I just choked on my beer... LOL!
The Tyee is to MSM as Robot Chicken is to Family Guy but it looks like a wider audience is becoming aware of weakness in the local market. Paul, I'd be interested to hear how traffic to your site fares in the next few days after Tyee exposure.
FV:11453
New Listings 114
Price Changes 154
Sold Listings 61
I will watch the stats and see if I get a significant increase from the article. The Tyee gets more traffic than some may think.
I should have said something clever about 20k... damn.
"There are 580 waterfront properties in Vancouver harbor and there will be no more. I live on one of them."
What, on the roof or something?
Looks like inventory growth has really decelerated, despite the low sell/lists.
Especially surprised that inventory has now dropped somewhat in NVan. Not massive drops by any means, but 5% less inventory in condos is meaningful I guess. And MOI in NVan is still much lower than GVan as a whole. Thoughts?
I bet all the anonymous's wish they had thought of a name... or maybe not.
That's pretty cool, good on the tyee for keeping it real...its all they can do!
Hello all you reality guys,if the market tanks(more like when) before the 2010 money pit games just think about that olympic hangover? My perspective as to what will happen is this--Quality homes in a good area will maintain a high value(maybe 20 to 30% drop)BUT those crapolla condos in a crapolla area will sink faster than the queen of the north and far deeper,keep your eyes open,fasten your seatbelts,the speculators will flee faster than Gordon Campbell from a breathalizer machine,one more thing,all those construction jobs that have been propping up this smoke and mirrors economy,can you BUSTVILLE---P.S. A smart operator might want to buy a bus and start the FORECLOSURE TOUR!!!!
Hi anonymous 10:44,
Many people make similar assumptions about wealthy parts of town doing better in a real estate collapse. However, there has not been a good reasoned argument for that. Past collapses have been more-or-less the same across the board.
I actually think the wealthier classes in Vancouver are going to get hit harder than anyone else in a crash.
Some 20 year-old kid who uses loose credit to buy one too many condos will declare bankruptcy with little more to lose.
But imagine what will happen to a 50 year-old professional, with all kinds of other income and assets, who buys too much real estate at the top. He/she can't just declare bankruptcy without giving up everything he/she worked for over a lifetime. Lots of heartbreak and gut-wrenching decisions. Maybe even...naw, won't go there...
It will get ugly.
When I think about Vancouver real estate, I think of this quote from the movie THE PRESTIGE:
Every great magic trick consists of three parts or acts. The first part is called "The Pledge". The magician shows you something ordinary: a deck of cards, a bird or a man. He shows you this object. Perhaps he asks you to inspect it to see if it is indeed real, unaltered, normal. But of course... it probably isn't. The second act is called "The Turn". The magician takes the ordinary something and makes it do something extraordinary. Now you're looking for the secret... but you won't find it, because of course you're not really looking. You don't really want to know. You want to be fooled. But you wouldn't clap yet. Because making something disappear isn't enough; you have to bring it back. That's why every magic trick has a third act, the hardest part, the part we call "The Prestige"."
... there has not been a good reasoned argument for that...
If declines are approximately consistent across the "desirability" spectrum, it means the price compression we've seen on the way up has become permanent. I haven't seen anyone attempt to argue such a thing is likely, but I'm happy to hear a possible rationale for it, always interested in learning something new.
If there has been price compression, than why has Vancouver West had higher than average price increases over the last five years? For SFH its much higher than average.
Vancouver West SFH increased 109.8% over the last five years, while the entire REBGV SFH increased 89.5%.
The Westside is going to crash bigtime, just like everywhere else.
The North Shore appreciation was a bit lower than average. However, that hasn't helped West Van.
The lowest 5 year appreciation was in Maple Ridge SFH, Poco townhouses and South Delta apartments.
Source: Realtylink
Ding,ding,ding. We have a new winner. 27% under list is the lowest sold under list yet, I believe. Any details, Paul?
If there has been price compression, than why has Vancouver West had higher than average price increases over the last five years?"
Ssshhhh... don't ruin a perfectly good argument with facts.
The -27% was just a crappy mobile home. No big story there.
"
I too suggest you should write a book, and call it "One of the greatest fools".."
Or better yet, "the greatest fool". LOL. I spilled my coffee on my almost new laptop. Geez!!!
Irony. We all are happy to see the real estate market come off and hope it crashes and burns while the person who runs this great blog to voice our opinions makes a living off a healthy real estate market.
Will look you up Paul and buy from you during the next cycle to repay you for these tough times ahead.
2 neighbors have put their condos on the market at above 12% of 2008 assessment values.
I know the 2008 assessment was done early in the year. But has its value increase 12% since?
The last sale of similar unit was in May for 25% less of what they're asking now.
oops ... last sale on May 2007
"But has its value increase 12% since?"
I can put my 2001 Nissan Sentra on Craigslist for 20K but that doesn't mean it will sell. Wish upon a star.
They could list it initially at 12% over 2008 assessment. Then reduce the price 20% and advertise a double digit price reduction.
"Hey honey, this place has its price reduced suddenly by 20%!!! It MUST be a bargain. Let's not waste any time (thinking) in order to snap it up right away!!!!"
Seems a likely sales tactic. Works in retail stores, so I guess it would apply to RE.
It is great that inventory numbers have increased, more competition means sharper prices, but quantity may not necessarily mean quality. There is a lot of poorly built homes out there compared to well built ones.
If your looking for an extremely well built place, you may want to start your search early. Several people I know took two to five years of searching before they found the high quality construction they wanted. Extremely well built homes don't have high turn over rates in this city, usually each owner stays for many years before ever selling.
"...while the person who runs this great blog to voice our opinions makes a living off a healthy real estate market."
No matter how deeply I wish good for anybody, if the person has not been responsible, he will learn his lesson. A healthy market gave lots of RE people (mortgage brokers, realtors) opportunities to make lots of money and the smart ones stored them for rainy days (knowing that sunshine wont last forever) where as the so called "greater fools" invested back in the same market thinking its going to go up for ever.
Personally, I dont wish anyone's bad (last one being Paul B here) and I know I will be sorry for lots of people once it starts playing out, but they will get what they called for and there is no exception to it, be it Paul, my brother, my son or George Bush.
AFAIK, paul has been bearish on this market for quite some time and I am sure he is smart enough to see the bad times coming ahead. Unfortunately, I know of some RE people, who actually believed this crappola of a hype and are heavily invested. Feel sorry for them as they are nice people otherwise but then.....
You do not need to be intelligent to know what you do not know. And if you do not know investments, then your best strategy is to diversify and utilize the advice of a professional. For those who choose to believe in themselves, rather than in a professional advisor, they deserve to bear that risk. And they deserve to be burdened with the losses and reap the benefit of gains. I have no pity for those who presume they are incredibly savvy when they know very little. Those with hubris and excessive self-confidence will reap what they sow.
I am pretty sure that real estate agents are not licenced investment advisors. To the extent that they are giving people advice based on the investment merits of a real estate purchase, they must be exposing themselves to some kind of liability. If they are representing some kind of investment or market expertise to their clients, then they deserve to be raked over the coals in court. If that's the case, and the client is led to believe that they are dealing with an investment professional, then it is not the client's fault. While you could argue that the client should know better, not all individuals understand that a real estate agent, or at least the average real estate agent, is not an investment professional and has limited financial expertise. I really do hope that people examine their legal options in regards to any dishonest misrepresentations made by their advisors/agents.
I despise dishonest salespeople.
In a stable, equilibrium market there should be an equivalence between capitalized rents and prices for real estate assets. That's required in order for investor portfolios to be rationally balanced as between real estate and any other assets (bonds, stocks, GICs) with some investors actually holding positive amounts of real estate.
In Greater Vancouver that relationship has been wildly out of whack for nearly forty years, with prices being too high to be supported by underlying rents.
Affordability, or lack thereof, is not the real issue. It's comparability of returns on investment as between real estate and other investment options.
As far as I can tell, prices in Greater Vancouver are about two times what can be justified given rents. So a 50% price reduction is indicated.
"As far as I can tell, prices in Greater Vancouver are about two times what can be justified given rents. "
Really? Be careful here. For a condo you may be right but a detached property in a good neighborhood will always look like rents are low because the land is underutilized.
It's worth pondering whether there is a 40 year bubble in Vancouver prices or the market knows something we don't. It seems like a long time for a bubble but I'm sure it could happen.
To all bears (which looks like everyone is on this blog) and sorry for interrupting the party BUT
If the housing market crashes, the whole economy will go down and everyone ends up paying for it. It's funny to see how close-minded some people are and cannot put everything together. Anyhow, I thought you may want to look at flip side of the coin just in case you wait too long to get into the market again and miss the train AGAIN:
http://www.movesmartly.com/2008/07/canadas-real-es.html
Also, has anyone of you consider the cash that comes into our country by new wealthy immigrants. Look at properties in West Vancouver and North Vancouver. Over the last 3 years, majority of the buyer of properties 1M + were from Hong King, Korea, and Iran and they can afford to keep their properties no matter what happens to the market, may be Paul can confirm this.
I personally know an investor from overseas who bought 16 units just in one tower in DT for cash and he plans to keep them at least for the next 5 years and that is just little portion of his real state holdings internationally. The point that everybody misses is that Vancouver is becoming an international city now and you have to compare it with other international cities. People are paying twice as much for a shoebox in middle of nowhere in Dubai. If you are waiting for a 20% correction you may need to wait for a disaster like an earthquake or something, the way I see it, some may still be OK with that option too. Now you can continue the party... but mark this post.
vancouverguy "While you could argue that the client should know better,"
I would argue that. If you are making a half mil purchase you should at the very least investigate what criteria are used to obtain a realitor license. The course itself is simple and anyone with an average high school grade (C-) can easily pass the exam. I have seen and met a lot of nieve agents that "think" they have something of value. Just a few questions about rental fundamentals would clue you in as to if the agent is aware of any economic principles. Ask some questions, ask about THEIR life experience,ask them about two properties and to tell you WHY they suggest you buy one over the other. If the answer is "Oh this is a real popular building, ask why? If the answer is because everybody wants to live hear dump them fast! If the answer is because the management is pro-active, maintenance fees are going up each year, the contingency is great then pause and say why does increasing maintenance fees mean this is a good building? The agent should say because if they are not increasing the fees at least the cost of living each and every year then someone like you the next buyer is going to end up paying for years of neglect. If an agent said that to me I would stick with them. (Obviously I am speaking of Condo's). The comparison I use is this..you are buying a almost new Porsche and you ask the owner or CAR salesman how much did you spend on maintenance last year? They say " hardly anything went to a discount oil change place and skipped all the dealer services". So you gonna buy it? :-)
anonymous "I personally know an investor from overseas who bought 16 units just in one tower in DT for cash and he plans to keep them at least for the next 5 years and that is just little portion of his real state holdings internationally." Hmmm maybe thats the guy who we are evicting his tenants, the neighbors all owners are tired of having call girls sitting in the hallway spitting and smoking. :-) Not to mention a steady stream of visitors night and day, world class I would say! :-) This is a BRAND NEW CONDO OWNED BY OFF SHORE PEOPLE. Suggestion? Don't buy anything in a building with absentee offshore owners!
How numbers looking?
anonymous @July 29, 2008 4:52 PM
"I personally know an investor from overseas who bought 16 units just in one tower in DT for cash and he plans to keep them at least for the next 5 years and that is just little portion of his real state holdings internationally."
Is your investor friends one of those panicking in forums asking how long will the home slide last, as they cannot have their capitals tide up indefinitely.
Vancouverguy, while I agree with you that we are not experts on investments ourselves, we also must be wary of the cost of "professional advice". When it comes to large cap equities, the overwhelming evidence is that paying for "professional advice" actually lands you worse off due to the general efficiency of markets.
In fact, a recent academic analysis has found that the number of active professionals who can beat the market over the long term has been 0.6%, which is within the margin of error of the study -- it is therefore statistically possible that no active manager has had that ability in the long haul. Even if there was one who could do it, it would be impossible to identify in advance who that is.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=869748
So the bottom line for me is to invest in tax efficient low MER ETFs that track the broader index (such as Barclay's XIU - with an MER of 0.17% per year) - instead of trying to outsmart the market.
And DO NOT DIY it by investing in individual real estate properties - buy publicly traded REITs if you like real estate. You currently can buy REITs at a significant discount to NAV -- whereas if you buy prpoerties on your own you will pay the full (and artificially elevated) price. Oh yeah, and you will also have to do the work of maintaining the property itself. I can make much more money spending time doing my professional work, and let my savings earn money passively.
What do you guys think?
"sorry for interrupting the party BUT
If the housing market crashes, the whole economy will go down and everyone ends up paying for it."
No, some people will, others won't. And if you've run a business model that assumes that boom-time incomes will continue indefinitely, you deserve to go out of business. It's called creative destruction. That's why recessions are a good thing in the long run: they kill off flabby businesses that have done nothing other than ridden a rising tide upwards while doing little work.
Won't affect me at all. I'm paid by a huge company based in France. If anything, a weakening loonie will make them even happier to pay me. Bring it on. I look forward to seeing realtors, speculators and other parasites out in the street with their possessions in boxes. Seriously. They're just a tax on real workers' incomes.
@ schnorrer:
1) Is there a way to get the whole paper? I'm not familiar with this database.
2) The authors note in the abstract that pre 1990 (i.e. pre explosion of retail mutual funds), +alpha managers are more like 9.6%. So, the message here might be, don't just plunk your money into whatever they're hocking at CIBC. Careful digging might significantly amplify your likelihood of finding a +EV active manager.
3) As to the "Efficient Market Hypothesis," I refer interested readers to Edward Thorp's columns in Wilmott: http://edwardothorp.com/id9.html (specifically Columns 11 and 12)
All that said, if you can't or don't want to go digging, I totally agree that low MER ETF's tracking a broad index are the way to go.
"The point that everybody misses is that Vancouver is becoming an international city now and you have to compare it with other international cities."
What are your criteria? I mean, it isn't any kind of major finance or trading centre. It's a big port, but so is Montreal. There are no big income streams in Vancouver (other than through the drugs trade, perhaps). There are lots of people who move here with their cash, but that doesn't make Vancouver an international city any more than Miami. Or Kelowna. I'm just not sure if you're trying to put it in a group with, say, London, New York and Hong Kong. Because believe me, it ain't. It's a northwestern provincial town that's attracted some affluent migrants and some drug dealers. Do you seriously think the movers and shakers of the world are now coming here rather than to NyLonKong, or Chicago, or Shanghai? Gimme a break. In the grand scheme of things this place is a particularly pleasant backwater with a little cash in its pocket.
"I look forward to seeing realtors, speculators and other parasites out in the street"
Sorry, let me rephrase that:
"...to seeing THIRD-RATE REALTORS...."
i.e. people who really don't have their clients' interests at heart.
I have a lot of time for Paul B. He comes across as a totally straight guy who actually looks out for his clients.
Rob said:
"All that said, if you can't or don't want to go digging, I totally agree that low MER ETF's tracking a broad index are the way to go."
Ah, but the point is that there are no managers who consistently beat the index over the long term. A negligable 0.6% fell into that category WHICH IS WITHIN THE STUDY'S MARGIN OF ERROR.
In other words, it does not work. There will be a certain number of pros who did well in these past years, but that does not predict that they will do any better in the future. Once you subtract out their fees, you are WAY behind.
Anyways, my main point is that the return you will get long term holding equities are ridiculously superior to those buying real estate on your own, unless you are some sort of guru (which too many feel they foolishly are).
As we all should know by now, a house over the long term only increases with inflation. That's all.
Its hard for people to realize the fact that houses as an asset have 0% gains after inflation over the long term because we are at the peak of a massive speculative bubble in Vancouver, which is just now starting to burst. But its the harsh reality.
Vancouverites will learn this lesson soon. For most, unfortunately, it will be learned the hard way.
"If the housing market crashes, the whole economy will go down and everyone ends up paying for it."
Ah but the burden will not be equally shared. Bankruptcy or servitude for some, opportunity for others.
"As we all should know by now, a house over the long term only increases with inflation. That's all. "
With greater utilization of land it is possible for many houses to increase greater than inflation. This is partly priced in already but not completely.
anonymous {July 29, 2008 6:25 PM}
"What are your criteria? I mean, it isn't any kind of major finance or trading centre. It's a big port, but so is Montreal. There are no big income streams in Vancouver (other than through the drugs trade, perhaps). There are lots of people who move here with their cash, but that doesn't make Vancouver an international city any more than Miami. Or Kelowna. ... It's a northwestern provincial town that's attracted some affluent migrants and some drug dealers."
Well said.
I find it amusing that some Vancouver boosters like to talk about London and New York, cities of over 10 million, when Vancouver is still under 3 million. And when it comes to the issue here, housing prices, they vehemently resist comparisons with our nearest Canadian comparators, Calgary and Edmonton.
Let's think about Seattle for a minute. Their downtown condo prices have reached, in some projects, the same kind of lunatic $600 per square foot price range as here (when construction costs are at most about $200 per foot).
So, what does Seattle have in terms of industry, in terms of employment? Well, there's a manufacturing outfit called Boeing. At the peak of its cycle it employs over 100,000 people, more than the entire BC forest industry. And of course in business services, there's a computer related outfit known as Microsoft. I really have no idea how many they employ, but I hear the head honcho there has apparently become even richer than Vancouver's best-paid, Escalade-driving drug purveyors. And in the field of consumer services there's a coffee grinding business called Starbucks, which apparently is well known. What does Vancouver have to offer that's in the same league as any of these companies?
OKay, so forget Seattle. What about Calgary. Calgary now had more head office employment than Vancouver, though as recently as the year 2000 that wasn't the case. Way to go, Vancouver! And please, don't tell any of our urbanista gurus, like Stephen Rees or Gordon Price, that the lack of a modern freeway system may be one reason head offices have left this city over the past few decades. They simply will not allow that kind of talk, ... because they are just way too busy promoting the virtues of downtown condo living!
Now isn't that a strange bloody coincidence? The gurus who are promoting urban residential real estate, not directly in sales, just helpling to build the hype, aren't the least bit concerned with what's happening to the real economy of production and employment. They're only concerned about what they euphemistically call "land use patterns" and urban amenities.
Its time for a reality check,the gvrd has the highest gas prices in Canada,high food prices,user fees,electrical rising,teresan gas through the roof,over escalating property taxes,ICBC gouge machine,highest transit prices in Canada,expensive ferries,NOTHING IS CHEAP IN BC,wages have been flat for a decade,the highest in Canada in the affordability index,expensive smokes,booze,even lumber.
People(most people)couldn`t afford to buy the homes that they did,the lure and con of the real estate players drew them in,I suppose if people (who bought in the last 18 months)can make it if their prepared to live like a peasent hoping nothing breaks and their job doesn`t dissolve.
I am suprised that the bubble burst befor 2010 games and I bet the speculaters and pre salers are going into shock as we speak,Calgary is a disaster zone and the affordabilty index is almost a third lower than here and theres no sales tax or property transfer fees and higher wages and everything is cheaper and I mean everthing!
Funny things happen to people,if they have equity and prices are rising they will hang in there but upside down mortgages and a feeling of being stuck preys on the mind.
Rent price is the key,if the rent won`t pay the load then look out,disaster,I don`t know how many are aware of this but wages are pathetic in BC,also well over half of all seniors have gone to the well and borrowed on equity and thats what been driving the economy,Campbell has fooled everyone with smoke and mirrors,our debt has risen 2billion under Campbell with billions in debt on our BC credit card.
Vancouver is going down hard,the worst in Canada,ENJOY THE RIDE ITS GOING TO GET UGLY!
You're absolutely right. I have been saying for years that we NEVER get a break in this province. For anything!
You know something? I used to feel guilty about crossing the border and buying things. Not anymore. I'll fly out of Seattle for any trips I take, and I'll raid that "Dollar Tree" store in Bellingham (and elsewhere!) like there's no tomorrow.
I am fed up with being gouged every which way I turn.
And the BS! The likes of Michael Campbell's gums a flappin', along with Muir, Bill Good, the "concerned-looking" Deb Hope, Ozzie Jurock, What's her face Clark on the radio, Rob Chipman- types and all the rest of them...
I've had enough.
I am fed up with being gouged every which way I turn.
Yeah, right. Welcome to the matrix.
paul fv please
I am fed up with being gouged every which way I turn.
The more you consume the more fees, taxes, etc... you pay. All the scoundrels you listed make their money from the transaction costs related to consumer purchases.
Its time for a reality check,the gvrd has the highest gas prices in Canada,high food prices,user fees,electrical rising,teresan gas through the roof,over escalating property taxes,ICBC gouge machine,highest transit prices in Canada,expensive ferries
That's the plan - that's why the liberals were voted in, to lower taxes and raise user costs for services - to stop gov't subsidizing of services.
First - The "celebration" isn't for negative news as much as it is for the fact things are FINALLY starting to reflect the market's fundamentals. Also, many of us have criticised our governments for allowing/fueling a boom/bust economy over and over again rather than dissuade them through regulation ie. Germany.
Furthermore: Similar to how one here alleges all bears are naive not to think the housing crash will have or come with a negative economic ripple effect. I think it's just as naive not to understand that some of us are prepared, well prepared for such turmoil.
Remember the analogy of: "When the tide goes out, we'll see who was swimming naked". While I don't have my money tied up in illiquid real estate (shocking, I know), I do have six figures plus in cash and liquid investments for a rainy day or a time when I may want a home.
Just something for you to munch on. Thought you might be hungry while you're on your soapbox... carry on.
In no way was I endorsing professional money managers as in mutual fund managers. I'll get to my response to that part of the discussion in a moment, but I was not recommending professional money managers. What I was saying, however, is that people should take portfolio allocation advice from a professional if they are making a significant allocation decision, and hopefully that person can also provide some indication of real fundamental if you are looking at something like real estate. My emphasis was on the fact that real estate professionals should not provide investment advice. I agree that most people should understand that real estate agents do not have expertise, and I can certainly determine that for myself. HOWEVER, for those who do not have any knowledge of the space and the fact that real estate agents are not qualified to provide investment advice, they should be able to take some kind of action against the real estate agent if the real estate agent provided advice on the basis of the investment merits of the real estate asset. I am not certain that is the case, but I thought that representing yourself as an investment expert in Canada and providing advice when you are not one meant you were liable. Can't remember though.
In regards to the money manager skill paper presented, a few things:
1. They require a positive and significant t-statistic in order to place a fund into the positive (and potentially just lucky!) category. So you only get into the positive category if there is less than, say, a 5% or 10% chance that your real performance could actually have been zero. So if the average alpha is slightly negative, you already have a low chance of getting into the "significantly positive" category. But significant is determined by the variance of returns, not whether or not the actual outperformance is significant. This is deceptive, and in my opinion unfair. Real life does not use 5% significance tests.
2. You then look at this limited proportion of funds that you say were significant and positive and say that some of them were only significant as a result of luck, because some of the zero-alpha funds can be in this category by chance.
What figure should this represent? Without being able to see their tables, I believe it should just represent any area of significant positive alpha funds above the standard normal distribution of zero-alpha funds. I didn't take as thorough a read as I could have, but that is my interpretation. So OF COURSE almost no funds fit into that category. That figure doesn't represent skilled money managers who are generating significantly positive returns by the interpretation of any layperson. It's a statistical fabrication of financial researchers.
So not only does the statistical test applied to the figure obscure whether or not that represents money managers' ability to beat the market, it isn't even trying to represent whether or not they are able to beat the market based on their level of market exposure! Instead, it represents whether or not they able to beat their representative Fama-French four factor model returns! Most people don't even know what that means! Honestly though, that's a model that presumes that just if you can explain outperformance through a model, even if it does not require the investor to take on any additional systematic risks, then it is not real outperformance. To be clear, a manager could beat the index by 10% per year without taking on any market exposure above that of an index fund and this model would say that they were not outperforming. This does not represent whether or not money managers can beat the market while taking normal market risk (as in a beta of one, if anyone gets that).
Now, I'm not saying that money managers are brilliant. I'm just saying that the paper does not represent whether or not manager's beat the index, or whether or not manager's are skilled, or whether or not manager's actually generate outperforming returns. It represents none of those things. The way they worded their abstract is deceptive, in my opinion, because most people believing it would interpret it as you said. Grr.
Vancouverguy,
I am reminded of a quote from An Inconvenient Truth:
"It is difficult to get a man to understand something when his salary depends upon his not understanding it."
The money management business (of which I believe you are a part) relies on the public not understanding that passive management beats out active management over the long term after fees and expenses.
I do not want to reveal more about my occupation and level of education on this blog for my own privacy, except to say that yes, I do understand statistics and study design.
Anyways, like I had written on your mini blog after your post on fundamental valuations (was using the handle "Michael" at the time), your analysis of the housing market is at some of the highest level I have seen on these blogs.
Also, I know that we do agree on the outlook for Vancouver house prices (crashection), which is the purpose of Paul's blog.
I think we can agree that people would do much better in the coming years having the bulk of their savings invested in diversified equities then in individual Vancouver real estate properties (even after taking into account a money manager's fees). Of course, they would do a few percent better in diversified ETFs with low MERs ;-)
So I think we agree in general here, just a different nuance.
To stay on topic,I have never heard of any real estate market that skyrocketed for 5 straight years,reached a peak and then just froze and stayed there, so unless you believe that prices are going to rise (right) they only have one direction to go.
With the feds eliminating the 40 year mortgage and requiring a down payment of at least 5% is taking most first time BC buyers out,now I am no expert but people aren`t going to scrape and spend all their money for a 2 bedroom or smaller condo in a flat and or declining market?
Kelowna is in trouble,the island is hurting,the north,don`t ask,I listen to cknw and about a year ago they were flogging (tom larchide) mer mar village (by bosa in whiterock)stating there`s only a few left hurry hurry hurry and get in,well the ad is back flogging it again with a few left and the penthouse,hmmm makes you wonder,up on the sunshine coast where I am listing are everywhere,development has stalled,there are several projects started that got under way to late,they are doomed for failure,as a side note to bad for translink that had (too late)vision of making a fortune as land developers(lol)
The greed of everyone has contributed to the looming bust,way too much inventory to fast,if they would have slowed down to half speed it would have lasted much longer and to exasperate things even more will be the gradually but speeding up layoffs of construction flunkies,I warned my nephew to get his degree his parents would have paid for everything buy no,he was in a big rush to earn 16.00 per hour as a flunkie,he just wouldn`t believe me about boom and bust construction cycles,he has never seen empty want ads in his lifetime and I am afraid tens of thousands of others are in the same boat.
Just what are these nail bangers going to do,deliver pizzas,work for translink,THE VICIOUS CYCLE BEGINS.
Ahhhh, I'm not part of the money management business at all actually :)
Am I wrong in my interpretation of the paper? I do think that my reading of it is correct, and I am certain that it is not a paper on beating the index, but rather on beating a Fama-French four factor model construction for each fund... but I may have my interpretation of the stats they employed to get there wrong. If so, please tell me.
But no, I'm not in money management, as we advise companies and private equity funds, rather than the general public. And we don't advise them on allocation of their cash portfolio either...
In fact, a lot of my colleagues would be offended if someone suggested they were in money management or provided any "retail" kind of advice. So I have no vested interest in the investment advisory industry. I don't want to be in that industry and I never will.
I actually don't believe in investing in most mutual funds because I agree that MERs eat most of the returns, and so I vote with my money and invest only in index funds or in securities where I feel there is a fundamental mispricing because of current market sentiment against a company. But, I would be willing to invest in a small cap value fund in Canada, as the FF four-factor model demonstrates that generates market-outperforming returns without increased market variance. Anyways, now I have to go get on a plane for work... I dislike travel.
Sorry, my main point was that I disagree with the study methodology, not with the implication that most of the time it is better to invest in ETFs. My point sometimes gets lost in the attempt to be thorough on the way there.
Yes, I think we are actually in agreement! :-) It is amusing to me that a massive mutual fund industry exists for really no good reason.
I had mentioned earlier, though, that if someone was a real estate bull (which as you know I am not at this place and time) -- they should invest in Canadian REITs, or American REITs for that matter.
The market players have already devalued many of these equities such that they are at significant discount to NAV.
So, you certainly would do better than listening to a realtor tell you that such and such a property is going to "go up" or whatever - and speculating on individual properties.
But, I suppose you can't leverage massively into REITs like you can with the other way, which is what entices these fools.
Anonymous
"I have never heard of any real estate market that skyrocketed for 5 straight years,reached a peak and then just froze and stayed there, so unless you believe that prices are going to rise (right) they only have one direction to go."
Well London and many parts of -England paused for a few years after some big gains. It wasn't quite as rapid as here though.
Moot point however, we didn't even have a pause at the top like many other markets did. The peak of our graph looks like a knife edge, the losses we've had over the past couple of months are really staggering, if they continue at this rate Vancouver will have the distinction of being the hardest crashing city in the world. Wasn't it here that someone pointed out we're on track for something like a -3.6% month? If that keeps up we'll be back to reasonable levels in a couple of years.
drachen,
The last couple of months have indeed seen a dramatic reversal in psychology. There has been a mass awakening and awareness is spreading by the week.
July price drops will catch a lot of people by surprise, and that could crank up the panic meter another noth or two.
I find that the numbers since the high 19k listings have been really weird. Is it just me?
I mean the total listings climbs a very small amount every day.
The difference between new listings and sales is often close to 150, and yet the total listings climbs by 20-40.
Is there any possibility that the board is forcing listings that are old to expire? or can SO many of the listings be re-lists at lower prices? The numbers just seem to have an air of 'manipulated' They seem to be controlled as if someone is trying to stop the rapid growth of inventory.
I don't recall having such a large difference between (new listings - sales) and (growth in inventory) in the leadup to getting to 20k.
Or maybe it's just me. The increases in inventory were in large jumps when we passed through 19k (both times, and when shooting up close to 20k) Then suddenly, the increases stopped. even though the S/L ratio's aren't improving.
I'm one confused guy. I suppose it's possible that a bunch of sellers are pulling their listings off the market, but ya, this just seems weird.
Maybe I'm just too impatient to see listings inventory rocket.
Schnorrer,
If you want to INVEST in real estate, then a good way to do it is through REITs. As they are, and will remain, flow-throughs, they are perfect for RRSPs now that income trusts are dead.
If you want to SPECULATE on real estate, then REITs are not useful, because it is much tougher for a REIT to end up at crazy prices. People can short REITs. There is liquidity in REITs. There are rational institutional investors examining REITs. And, as you said, you cannot leverage yourself to the same extent in REITs. And REIT analysts actually look at fundamental values, too! They may adjust the cap rate with the market, and they may end up setting it too low when the market is frothy, but least they actually look at income.
I don't know what cap rates current REITs trade at (and I'm not inclined to check at the moment), but you have to believe it's a helluva lot better than Vancouver residential real estate.
Alright, I'll check on one just to be safe that I'm not talking crazy. CanREIT currently yields 4.6%, which is not fantastic. Annualizing Q108 EBITDA, we get $204m in EBITDA. They have $1.197Bn of debt, negligeble cash and a market cap of $1.77Bn.
EBITDA/EV, which is a reasonable enough proxy for cap rate for a five minute analysis, of 6.9%. Doesn't say much for Vancouver, does it?
"EBITDA/EV, which is a reasonable enough proxy for cap rate for a five minute analysis, of 6.9%. Doesn't say much for Vancouver, does it?"
Entirely agree. Some very juicy returns available on some of the riskier REITs, such as in the hotel sector. INN.UN and RYL.UN dividends signifificantly over 10%. Hold that in an RRSP (or a TFSA next year) and that money is yours to keep tax free.
I'm not saying that these equities will overperform/underperform the market, but for real estate bubbleheads, the future returns from REITs will make Vancouver RE look like Zimbabwean dollars.
Unfortunately, as I think you had mentioned, people are not taught about basic principles of investment, asset classes, etc in school and they remain blissfully unaware of these realities. Not even the basic concepts. They see equities as "scary" and houses as "solid".
Kind of sad, in a way - but makes for interesting discussion while I'm procrastinating at work :-)
"20,000 Listings. Is this the top???"
Uhh... the way inventory has slowed down over the last week or so, perhaps for summer it will be the top. Maybe 20k is a magic number. How ironically prescient of Paul.
"Uhh... the way inventory has slowed down over the last week or so, perhaps for summer it will be the top. Maybe 20k is a magic number. How ironically prescient of Paul."
Wont hold my breath on this. This is a month end phenomena and has been happening for past few months. Towards the month end, listings and sales both die down, cant say about sales, but listings, people think oh, i will list it fresh the next month. I would say it top if we dont start the upward trend in 10 days from now. Till then, it is just normal month end slowdown.
FV:11488
New Listings 96
Price Changes 83
Sold Listings 50
Numbers for REBGV up in under 30 mins.
Just when I thought we'd seen the last of 100+ increases.
paul, how did FV numbers looked yesterday, I need them for my calculations :-(. Thanking you in advance.
No over list sales :)
Tuesday -- again -- seems to be a slow day for listings. Anyone else notice this trend? Any idea why this happens?
Of the current 20K+ inventory, how much MUST sell, based on units that are vacant or will become vacant (whether its sold or not)? What do you sense Paul?
If you look at Paul's graph the year over year one, you can see the trend. The trend is your friend.
Albeit this year we took the inventory to new levels, the trend of peaking middle to late year tailing off in the winter through expiries should continue.
Time of year is why we're seeing things settle down a bit... I think we'll be around +/- 1,500 from this number for the rest of the year. Just my prediction.
RE: Relisting
I think the listings are disappearing because there is a lot of relisting going on. It's a "fancy realtor trick". They relist after staging or a price change. This way it pops up on the other realtors fresh/new sheets again. It's just for marketing the property to other realtors, it probably doesn't make any difference to buyers.
I know a few people selling recently and they have all used the relisting tactic.
I think August will be slow for listings and sales...perhaps 21,500 by month end. I would imagine September, as people get back to 'reality' from vacation mode, we could see a real surge in listings. I do expect the sales slowdown will continue, keeping listings high and growing. JMHO.
Hey, what's with the numbers today?!? Looks like numbers from last year or the year before. Yikes. Don't worry, just a little month end blip I'm sure. :)
Does cheering a price correction make you a pessimist?
I think that it is in the eye of the beholder.
The old saw; 'The Chinese word for crisis is the same as that for opportunity', Wikipedia says that it is an etymological fallacy - This presumed oriental wisdom is used to communicate the inspirational notion that a crisis should be a time of optimism by erroneously deconstructing weiji (crisis) as wei (danger) and ji (opportunity)., but it is still inspirational.
Don't time the market. Price the market.
Another astute distillation by patriotz.
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