“The Kelowna area is seeing first hand the shock and awe from the south. Around the corner from me a spec home was built and listed in 2009 (or there abouts) and finally SOLD. Original price for this semi-lakeshore was $1,300,000 and this past week sold for the low low price of $511,000.”
- View at greaterfool.ca 9 Dec 2011 10:14pm
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This anecdote is actually quite appropriate for the dire situation Vancouver residents find themselves in. That is, this semi-lakeshore property is likely quite desirable, in an upscale community. Comparable to many of the Vancouver areas so many covet on the West Side, and elsewhere.
Even with this monster reduction in price, at $511,000 its unattainable for 99% of Kelowna incomes. As such, even with a 50% reduction the vast majority of Vancouver will remain unattainable for the majority of incomes.
Unless you are in the small extreme bear minority, where you believe in 60%+ correction, its time to think about solution other than an asset price crash.
“its time to think about solution other than an asset price crash”
See previous article:
http://vreaa.wordpress.com/2011/12/10/three-of-my-friends-are-leaving-the-city-all-are-professionals-making-decent-money-two-of-them-are-leaving-the-country-one-of-them-is-moving-to-another-province-there-is-a-good-chance-ill-be-l/
How do you figure 511K is unattainable for 99% of Kelowna? An anecdote a few days ago showed a couple making 92K/year get a 500K mortgage. All you need is a couple making not too far above the household average and that house can be bought if you are willing to take on that kind of debt.
Kelowna incomes are are lower than those in Vancouver, and I would think very few families make over 90k a year there. This is purely what I surmise based on the dismal earnings in Vancouver.
Even if you take the $511,000 selling price, and apply it to the average Vancouver household earnings ($67,000ish) it comes out to around 8X annual income.
Still grossly unattainable for most locals.
I dont know if it’s really fair to call this a 60% off sale. The way I see it, the place got built, they made up a number they hoped to get, and then lowered the price until it sold. No one ever actually paid 1.3mill for it, so it was never worth that to begin with.
Yeah, fair comment; doesn’t mean the same as 60% drop in sales price from time 1 to time 2 – that’s why we worded the headline as we did.
Reminiscent of recent “50%-off” condo sales in Kelowna; actually just drops in ask price.
Interesting in the grand narrative as examples of dropping seller expectation.
True enough. I just saw it and instantly thought “that’s not really 60% off,” even though you never said that.
Still pretty amazing how high the seller’s expectation was compared to what they ended up selling it for. One has to wonder what the house could have sold for had it been priced properly in 2009.
Pssst… Speaking ‘o regional ‘expectations’… there’s something timely [funny?] in your inbox, ‘o IllustriousEd [check it out].
When prices correct in Vancouver, I suspect several jobs will go as well. Plus, the only reason that a couple with an income of 92k is qualifying for a 500k mortgage in the first place is due to historically low interest rates…this is not going to last. If you ask anyone in Vancouver how long it would take them to save 10k, let alone 500k, you would find the truth…a complete population living paycheck to paycheck in homes they don’t own, buying food on credit, driving to work in leased cars to jobs which are dependant on having a healthy economy supported by industry which right now is wholly comprised of realestate.
Good comment, well said.
That same couple pointed out that it’d take them 5-6 years to save 25K.
Aside from whether interest rates rise or not, we suspect that buyers are going to be more reluctant to borrow (and lenders to lend) in a falling price environment. They’ve been borrowing to the eyeballs for the very reason that they think prices will rise.