The Globe and Mail – “In Vancouver, House Prices On A Tear”

In parts of Vancouver, such as the Vancouver Eastside, the market has reached fever pitch.  This article in the Globe and Mail by Kerry Gold, 19 Nov 2009 6:03 pm, has so many important anecdotal points regarding sentiment and market activity that vreaa has archived large swatches in this post, and highlighted two stories from it in the posts above.

“In the last three months, a heritage house at 274 E. 20th Ave. was listed for $959,000 and sold for $320,000 above asking, after eight days on the market. A heritage fixer-upper at 265 E. 24th was listed for $749,000 and sold for $1,033,000 within a mere 13 days. A month later, another house nearby at 214 E. 24th, was listed for $749,000 and sold for $950,000 within six days. A typical Vancouver Special at 4554 Walden St. was listed for $730,000 and sold eight days later for $958,000. All those houses were in the trendy Main Street area.”

“It’s very topical,” says realtor Rod MacKay. “Other places [in the country] are strong, but nobody’s seen anything like this. What’s really surprising is nobody anticipated the six-month dry spell being as slow as it was, and prices coming up as much. No one anticipated it bouncing back so far and so quickly.”

“At the beginning of this spring’s buying frenzy, buyers were offering $100,000 above asking in some cases. But by September and October, there were buyers – no doubt tired of being repeatedly out-bid – who are making offers so far above the asking price they couldn’t lose. In the case of the house at 265 E. 24th, it went for $284,000 above asking. “That takes a lot of stones to do that,” says the selling agent Darryl Sjerven. “There were 18 offers on that house. So you go in there, write an offer, and there are 17 other offers and you don’t know what any of them are. They could all be just $10,000 over asking. To go and write $284,000 over takes a lot of guts.”

To describe the bidding mentality these last few months, Mr. Sjerven uses the analogy of a “hang loose” hand gesture – with the three middle fingers curled under and pinkie and thumb sticking out.“Say you get five offers on a house, and suppose the house is listed at $750,000. The guy with the pinkie does not get it, he doesn’t know what’s going on,” says Mr. Sjerven. “Even though there are four other offers, he’ll offer you $700,000 subject to sale of his home and if he gets financing and everything. Then you get the typical pack in the middle, they’ll go around $785,000, or something like that. There’ll be a cluster of those people. Then there’s the thumb. It sticks right over the side and says, ‘this is my house. I want this house.’ He’s far enough ahead that it doesn’t get into further bidding or anything like that. And he buys that house.”

A few months ago, it seemed like the only houses being sold in bidding wars were the “hot properties,” the ones with three bedrooms up, new granite counter tops, and a gleaming in-law suite downstairs. More recently, the bidding wars have been over houses that aren’t so hot, such as that Vancouver Special that went for above asking.“The house wasn’t renovated or anything,” says selling agent Kenny Wong. “It was 37 years old. It had the original “shagadelic” carpets. It was on a 33-by-110 lot. It wasn’t even a standard lot. “I had a hard time selling a Vancouver Special in the winter – a lot of people made low-ball offers,” he adds. “Now they are going over asking.”

Although overall prices aren’t quite at pre-correction levels, for buyers it has felt like the spring of 2008 again.

As to where the market will be in early 2010, the current frenzy appears to be abating and realtors like Mr. Sjerven expect the lull to last over the winter and through to the end of the Olympics. Not many people like to list or buy homes around the holiday season, and few are going to want to sell around the time of the Games, when it could be hard to get around. That five-month lull will create “pent-up demand” that will trigger another frenzy, says Mr. Sjerven. “Once you clear the Olympics out of the way and we’re into April, it will be a race to those listings. Spring is going to rock.”

“I’m wondering who’s left… all of my bearish friends with the means to buy have bought.”

This exchange regarding personal knowledge of former bears buying, at mohican’s Housing Analysis blog 9 Nov 2009, starting 11:34 am -

M- :  “I’m wondering who’s left to buy– in my group of friends and acquaintances, my observations on who has bought are:
-2006-2008: non-bearish friends and acquaintances who could really (or in two cases couldn’t) afford it, bought.
-2009: bearish friends and acquaintances bought (all of them).
Yep, in my circle of friends and acquaintances, all of my bearish friends (with the means to buy) have bought. There are two exceptions: myself, and a couple who just returned from overseas. Aside from them, the only other renters work low-wage jobs, or are recent graduates.”

mohican: “I have observed the same thing within my circle as well. Including myself, most bearish friends have purchased already. They largely took advantage of the winter 2008 price dip and negotiated hard to get a decent deal. Many are still bearish – including me – but just wanted a little lifestyle certainty and were willing to pay for it.  I don’t know where the future buyers will come from – overseas? The ownership rate is at an all time high right now as per statscan.”

david: “When bears capitulate isn’t that the sign of a market peak?”

“Yes, the interest rates will rise, but my salary will also increase. If I’m laid off, or my mortgage skyrockets, I’ll work my ass off to keep it all together.”

Vancouver RE currently demonstrates historically record high price-to-rent ratios. Despite this, very, very low interest rates continue to make buying look attractive, especially if one only considers monthly payments. This illustrative example from Beth (2009 Nov 13, 20:27) in the comments section of the 12 Nov 2009 ‘Vancouver RE market bounces back’ article in the Georgia Straight, by Charlie Smith -

“My rent was $975 a month for a crappy, 35 year old one bedroom that didn’t have insuite laundry or anything, and where the landlord would knock twice then enter my suite without advance notice for non-emergencies, once even while I was on the toilet. Now, my mortgage is the same for a 12 year old one bedroom with laundry, fireplace, dishwasher. This includes maintenance fee. And I can have a pet. And no landlord can come in because he feels like it. Yes, the interest rates will rise, but my salary will also increase. If I’m laid off, or my mortgage skyrockets, I’ll work my ass off to keep it all together. I am confident in my ability to make it work. Downpayment? Some people work two jobs and weekends for years and years and years to save up for one; others inherit it when a loved one passes away; others borrow money interest-free from family, and others have it handed to them by well-to-do parents who would rather their kids have a condo than live in a dump run by a slumlord. Do you blame them? It’s not really anyone’s business where a downpayment comes from. It’s not a crime to have a downpayment.”

Personal Growth Through Real Estate Purchase – “His friends look at him differently now that he’s a homeowner”…”You have plants. You look after them. It’s like you’re an adult.”

A 24 year old pharmacist buys a downtown condo for $508K, and reaps the admiration of his friends. This from the Georgia Straight cover story ‘Vancouver real-estate market bounces back’, by Charlie Smith, Nov 12, 2009 -

“Even though he had never purchased real estate before, Alym Abdulla could sense that the market was heating up as he began looking at downtown condos last spring. The 24-year-old pharmacist started seeing suites in late March, and before long he realized that some of the units were receiving multiple offers from prospective buyers.

“I must have looked at close to 50 places,” Abdulla told the Georgia Straight in a recent interview in his living room. “I put in offers on two other places that didn’t go through because the market started to pick up.”

He said he was getting discouraged and was ready to quit when his real-estate agent, Stu Bell, recommended that he check out a home in a Bosa-developed building near the corner of Hornby and Smithe streets. When Abdulla entered the suite in the middle of May, he was immediately impressed by the layout, which featured two full bedrooms, each with an en suite bathroom, on either side of the living room. “The thing that really sold me on this place was the balcony,” he said. “It’s quite large. It makes you feel like you’re not trapped in your little shoebox downtown.”

Abdulla ended up paying the $508,000 list price. He said he bought then because he wanted to take advantage of the low interest rates. With a smile, he acknowledged that some of his friends look at him differently now that he’s a homeowner: “One of my friends who I used to live with in university, he’s like, ‘I feel since you bought your place, you’ve matured. You’ve completely changed in the way that you are. Before, we used to live the student lifestyle. Now, you’re always cleaning your place. You have plants. You look after them. You’ve even got a cat now. It’s like you’re an adult.’ ”

“The interest rate on their mortgage? Just 1.5 per cent.”

This from ‘Easy credit, soaring prices raise new housing fears’ by Tara Perkins, Kevin Carmichael and David Ebner, Globe and Mail Update, Friday, Oct. 30, 2009 7:52pm -

“Nick Burzese and his fiancée Di Pham recently realized the North American dream – they bought a house of their own. And the couple’s new home is not just anywhere. It’s in Vancouver, one of the country’s priciest markets. Having rented for years, the couple, who both work in the mortgage business, thought they’d never be able to afford a house in the city. They were doomed, they felt, to live in a distant suburb. As they house-hunted, they saw to their disappointment that the recession hadn’t dampened the market much. “Everywhere we went, there were so many people there,” says Mr. Burzese, 36, a broker at MPRO Mortgage Architects. Eventually, they came across an old 11/2-storey “character” home on a leafy street of detached houses near the Pacific National Exhibition grounds, on the city’s east side. “We immediately fell in love with it,” Mr. Burzese says. “It’s really an area that’s starting to transform.” Ms. Pham, 28, and Mr. Burzese put $57,000 down on the $570,000 house early this year. The couple says they’re comfortable with the debt. They make good money and are installing a basement apartment as a “mortgage helper.” But they might not have been able to get into the market were it not for the intervention of the Bank of Canada and the federal government – in the form of a continued low interest rates and federal policies aimed at maintaining the flow of lending and spending. The interest rate on their mortgage? Just 1.5 per cent.”