“A comment from ground zero and an industry player, me. I happen to live on the West Side of Vancouver and I am a mortgage broker so let me give you a first hand assessment here in Lotus Land.
I dropped by an open house yesterday for an 850 sq. foot condo listed at $540K to network with the Real Estate Brokers. (crazy that $540K buys you a 850 foot box)
First thing they asked me is if I was busy as they used my answer as a gauge of the market. Most mortgage brokers in my circle have seen their business drop 30-40% from last year. The two RE Brokers said that their embedded mortgage brokers in their RE office have been slow also.
It is getting significantly harder for mortgage brokers to compete against what the banks are underwriting as brokers are now racing to the bottom with rates. No wonder the banks got a finger wagging from the OFSI.
I asked the RE Brokers if the Asian money is still snapping up properties here on the West Side and they have said that has cooled considerably.
Although they did say lots of boomers are buying condos for their children to get them started in the game.
Maybe since we are all in the industry we could talk frank with each other and put all that Realtor sunshine talk aside.
Vancouver really only has 2 industries, Real Estate and Mining (ok maybe tourism), with China slowing down on buying real estate and commodities it would only make sense that inventories are rising and sales are drying up.
On a more personal note my wife and I have been contemplating buying a home since we had paper profits from her stock options and my stocks, but the downturn in the stock market has wiped a good $250K from our portfolio.
The market needs buyers like myself to perpetuate the next level but for now we are sidelined and watching.”
- Dave at The Economic Analyst, 5 Oct 2011 [Hat-tip to Ben Rabidoux for sending this along by e-mail (and to jesse who simultaneously reposted the comment on an earlier VREAA thread). Clearly an anecdote that captured our collective attention.]
So much here:
1. Mortgage broker who recognizes that prices are ‘crazy’.
2. Most mortgage brokers have seen business drop 30-40% yoy.
3. “Asian money” has “cooled considerably”.
4. “Inventories are rising and sales are drying up.”
5. One example of future demand being “sidelined” with stock market fluctuation.
All adds up to a cooling market.
Perhaps the top is in.
- vreaa
“they did say lots of boomers are buying condos for their children to get them started in the game.”
And how perverse this is! A child is thrown on the ladder, gets married, and decides the condo life isn’t the best for the up-and-coming new family. Upgrade, either sell the condo and ride the equity, or borrow against it and rent out the condo for “investment income”. Onto the family house with a comfortable mortgage, cash flows firmly in place, ready for the next stage in life.
Now if you can’t sell the condo, and have trouble convincing the bank of its “true” value, that tends to depress prospects a tad.
This market’s got more staying power than Mohammed Ali.
Key phrase: “The game.”
“Float like a butterfly. Sting like a bee.”
Did I get that right?
Ali retired in the end.
Interesting anecdote from Vancouver’s past: Ali was involved in the promotion of a company in Burnaby in the late-’80s, I think it was located at the old tech building on the NE corner of Kincaid and Gilmore, he once making a visit to the facilities for a media event. He had a cool trick where he could make himself look like he was floating by raising up the fronts of his feet in a clever way.
The company was, as most ventures in BC, a failure in the end but people who were there were impressed at how he could seem to defy gravity so easily.
This may interest some VREAA readers: http://www.news.com.au/money/property/australian-federal-government-gets-tough-on-foreign-ownership-rules/story-e6frfmd0-1225857643432
Interesting post about West Side markets drying up, but just this morning on the way home from errands, on a whim I stopped at 2 open houses west of Dunbar. At the first, a bungalow going for about $2.7 million, all of the interested parties appeared to be from mainland China; one asked as he left how much the land was worth. At the second open house, across the street, a very large newer house going for nearly $4 million, I asked the realtor why the family was selling. The answer was that they wanted their son to go back to China for 5 years. They had thought they would simply leave the house empty for 5 years, but the realtor had finally convinced them that the house would “deteriorate” if they simply closed it up and left it that long. When I gently pointed out that leaving a house in Vancouver empty for that long seemed a bit unfair, given the housing crisis here, the realtor seemed a bit irritated.
@ $540K for a condo, I still see lots of debt for most of these young people. If one loses a job after getting that townhouse/home for the new family and can’t find another one with comparable pay quickly, lots of problems can just magically appear fast.
And one more (anecdotal-evidence) comment today about whether house-as-investment situations may be lessening: I had posted here a few weeks ago about having phoned to inquire about a beautiful bungalow I saw advertised in September as a “great” rental. When I’d asked the property manager how long we might rent it, he said it was an investment property and we could expect to stay only “one, two years — depends on the market.” When I expressed frustration, he told me the days of being able to rent for 3-4 years or more were “over” in Vancouver.
The kicker: several days ago, when I drove by this bungalow, it had a For Sale sign on it.
Are the days of being able to rent for three or four WEEKS in Vancouver over? Ha ha.
Oh my that’s not good at all. But wait, Brian Yu said speculative activity was down since 2007 ergo there’s no “speculative” bubble.
Something’s puzzled me about Vancouver detached prices of late, I think I have a good fundamental answer for why people bid up prices so substantially — I’ve often chalked it up to irrational/stupid buyers and “dumb money” — but I think there’s a bit more to it than that; alas I’m not quite bright enough to flesh it out but here goes:
In a low inflation environment where capital retention is important, people will be looking for safe assets to “park” their money. Real estate serves as a play in this but with the added benefit that there is a perceived floor in (eventual) future prices and increasing scarcity based on looking at historical trends (adding in a few quotes from Mark Twain and Chinese proverbs for good measure). Since expected future inflation is low, the future price is equal to the current price. (I think this is called the “choke price”.)
So there is some “rationality” involved in buying at exorbitant levels because of this effect. And by “rational” I mean that people who are pricing in zero inflation for the foreseeable future will, assuming they see a price floor, bid up prices significantly. This does not preclude prices from dropping significantly in the interim but does show that, yes, as Vancouver grows so does its land values. I think, however, there is an underestimation of the volatile path to be taken to reach the “choke price”.
There is obviously “dumb money” out there, but there are lots of “dumb” places to put money, however there will be a propensity to invest in scarce resources in times like these.
FWIW
“choke price”
It’s always higher than the ACP FMJ price.
It’s just that some commissioning parties remorselessly insist on the ‘personal touch’ when ‘concluding’ a deal. Rather like BreakingBad’s Gustavo.
Sorry. Shady past showing.
Yep. Conservation ‘o capital. Big factor. CriticalCulturalMass, too (Speaking ‘o Mass, the ‘transubstantiation’ of WestSide Mortar&Bricks into significant capital gains part of the YVR RE magic show may prove a tad disappointing to some participants when the dust settles. Especially the leveraged SpecBuilders.)
And this fuzzy math has been right for 10 years in YVR. It has moved from hypothetical to axiom….as long as you stick with Global TV and don’t watch CNN.
We’ve all brought this up at parties. People get angry if you suggest real estate might go down. None of them ever intend to repay their mortgage – it is simply something they ride up until they cash out and retire.
@604x yeah but the logic only justifies a temporary state based on the marginal buyer. Marginal buyers are marginal, resources are finite not infinite, and cash flows matter in the long run.
I spend some time in Vancouver and have gone to open houses to see how little house you get for a gigantic sum of money. I went to an open in the summer on the westside for a new build. It was over million and basically had “home depot” type finishes. Many asians were looking at it. I felt like a second class citizen going through. Just checked MLS porn recently and it is still for sale. Obviously the buyers are more picky and looking for deals too.