Category Archives: 09. Delaying Buying

Folks who could somehow buy now, but have decided to wait in the hope of price drops.

Renter Buys In West Van – “For a few hundred more per month, you could own the place. Which is what I will be doing as my offer for a place down the street has been accepted. There is some value in staying in one place.”

“I am currently renting in West Van. It has been difficult to find decent, “affordable” rental accommodation on the North Shore. For a few hundred more per month, you could own the place. Which is what I will be doing as my offer for a place down the street has been accepted.
Went for 23% below the list price. Owner been in the place for 11 years, and over that time, the value of the property increased on average 5% a year. I negotiated hard, walked away twice, and eventually the seller caved, just like I knew he would.
I’ve been renting for 5 years now, ever since a health crisis with one of my young children moved me back here. I was the bear amongst all my peers who are all “owning”. I still think there will be a crash in the Lower Mainland – but I think it will be an uneven crash. Certain areas will crash worse than others. I don’t think the entry level house market in West Van will crash. I think it will take a 10-15% drop and then move sideways or at inflation for a generation.
There is some value in staying in one place.”

– chumpy le chump at VREAA, 2 Jun 2013 4:36pm

All the best with your purchase, chumpy.
Does the “few hundred more per month” include all expenses (and assume no downpayment?). Share the math if you care to.
Further:
That’s 70% increase over 11 years (5% p.a. compounded)? Is that representative of the price increases on similar properties?
As we’ve said before, we expect all property types to revert to long term means; we don’t expect any to somehow be exempt.
– vreaa

The Rare Individual With A Negative Ownership Premium

“I love moving. The longest I’ve ever lived in one apartment is 3 years. I usually move every year or two. Sometimes I move after only a few months. Some of my moves have been because I was renovicted by the landlord. Sometimes I move because the landlord never does repairs and I am sick of taking him to the RTB. But even if there are no problems with the apartment, I’ll start thinking about moving after one year. After two years in the same apartment, I start getting really antsy to move. Real estate bubble aside, I could never buy real estate because I could never commit to live somewhere long term. I don’t really understand how people do it? Don’t they get bored with their homes after a few years? Don’t they get tired of looking at the same view every day for years on end?”
perma-renter at VCI January 22nd, 2013 at 4:31 pm

Kits Notes – “I’m pretty sure that this is the first 3+ bedroom property of any type that I’ve seen in the 5 years I’ve lived here that is priced below $700K.”

James writes [via e-mail to VREAA, 12 and 14 Mar 2013]:
“A couple of properties that I’ve been watching in my neighborhood with interest...

v982432_4
Unit #1 2482 W 8th Ave; 1132sqft; Ask $699K
Granted this is a garden suite (but a nice one at that), I’m pretty sure that this is the first 3+ bedroom property of any type that I’ve seen since I’ve lived here (5 years) priced below the 700K mark in Kits. MLS blurb states: “NO HST & PRICED $146K BELOW ASSESSED VALUE!”

History:
Nov 2012 list price: $810K
Dec – price reduced: $799K
Today’s price: $699K -> -14% in 4 months! ouch!”

“Two other units in the same heritage-tear-down-and-subdivide Kits special..

v978640_2
Unit #2 2488 W 8th Ave; 1331 sqft; Ask $899K
This one is great because it’s a 2 bedroom and yet priced at a full $200K above the one above…but still “PRICED $106K BELOW ASSESSED VALUE & NO HST!”

Previous list price: $950K -> I wasn’t able to find a date on this…
Current list: $899K
Price Reduction: -5.4% in 4 months. Though I bet any money that the $950K price was an interim price drop given the obvious desperation on the other units.”

“Third still listed on one site but not Realtor.ca which means that some poor sucker paid too much money or they are in the process of relisting it:

kits row houses
Unit #3 2486 W 8th Ave; 1197sqft; Ask $950K
3 bedrooms but $250K more than the “garden suite”. “PRICED $79K BELOW ASSESSED VALUE & NO HST!”

La piece de resistance as they say.
Previous list price November: $1,050,000 (!)
Dec price reduction: $998,000
End of Feb price reduction: $950K
-9.5% haircut on a property that the city has deemed to be worth $1,030,000.
If it did sell, I would bet money it was NOT at $950K and therefore was probably -10% below assessed value at the time of sale. I’m sure all the other people on that street that are trying to sell , and there are a number of them, are not thrilled with this…”

“So, total $110K + $100K + $50K = $260K of assumed profit vaporized in 4 MONTHS.
Further, I managed to stumble across cached web pages with original purchase price of the property that was sold in May 2008 and subsequently torn down and replaced with the 3 “heritage style” Kits units above.
The original house looks like it was sold back in 2008 for $1.388M. Here it was then:

2486 w 8th 1.388M 2008

“I’m certainly not well versed in what it would cost to tear down to the foundations and then some, rebuild, subdivide and then flip a ~4K sq ft home like this, but an educated guess would be somewhere around ~$2-2.3M total for the 3 units once it’s all said and done including costs to sell each unit.
For the original list prices that WOULD have worked out to ~$500K profit. I didn’t consider cost of carrying the original mortgage since I’m not sure how these things work for developers, but 5 years of interest would be significant on a $1M+ mortgage.
Current list prices that profit drops to ~$200K.
And that’s with an assumed 1 out of 3 units sold and the nicest unit at that. No wonder they are getting desperate.”

Thanks to James for the above info and thoughts.
Anybody else got ideas on the math on a development such as this? -vreaa

Vancouver RE Crash On Track

Expected weakness continues, sales remain low. Things are playing out as we’d anticipate. Very significant price drops to come (all in all, 50% to 66%, peak to trough). :

SALES ARE WEAK:
“The flicker of optimism that sparked in Canada’s housing market when January sales outpaced December’s has died out, erased by a notable drop in February.
Last month’s declines were significant enough to prompt the Canadian Real Estate Association (CREA) to cut its sales outlook for 2013 on Friday for the third time since last summer. …
“Vancouver remains the clear weak spot, with sales down a seasonally adjusted 9.8 per cent in February and 29.2 per cent in the past year,” Bank of Montreal economist Robert Kavcic wrote in a research note.But some feel that much of Vancouver’s weakness has played out.”
[hahaha -ed.]
– from ‘Clouds gather over Canadian housing market’, Globe and Mail, 15 Mar 2013

SO ARE PRICES:
“The average MLS residential price in BC was $514,134 … down 8.1 per cent from a year ago.”BCREA news release 14 Mar 2013

INVENTORY/LISTINGS ARE HIGH:
“I’m seeing big increases in New West, North Van, Burnaby SFH listings. Historical highs for this time of year. VW has stalled out; VE puttering along. Condos downtown nothing special on the inventory side. I don’t know what all that means except that our little crashlet is *not* a “Van has too many condos; it’s just condos; houses are safe from all this” thing. It is in fact inventory growth and sales declines are mostly a SFH thing, from what I see.” [price declines will effect all sub-sectors of the market. -ed.]
VHB at VCI 15 Mar 2013 12:22pm

RE Inventory Chart130313
chart care of b5baxter at vancouverpeak.com

HOUSEHOLD DEBT CONTINUES TO GROW:
“The ratio of Canadian household debt to disposable income rose to another record last quarter, calling into question Bank of Canada Governor Mark Carney’s assertion that families are listening to his warnings about the risks of borrowing too much.
Credit-market debt such as mortgages rose to 165.0 percent of disposable income, compared with 164.7 percent in the prior three-month period, Statistics Canada said today in Ottawa.
In his previous two policy statements, Carney weakened language about the need to raise the central bank’s 1 percent policy interest rate, partly on evidence a housing boom was slowing and consumer debt burdens are stabilizing. Finance Minister Jim Flaherty tightened mortgage rules in July on concern some regional housing markets were overheating.
National net worth rose 1 percent to C$6.87 trillion ($6.73 trillion) in the fourth quarter, Statistics Canada said. On a per capita basis the increase was to C$195,900 from C$194,300.”
[Watch the per capita net-worth plunge with RE prices over coming years. -ed]
– from ‘Canadian Household Debt-to-Income Ratio Rises to Record 165%’, Bloomberg, 15 Mar 2013

MEDIA STILL PUMPING:
“Global TV just ran two RE spots (within an hour of each other) on this morning’s news featuring Joannah Connolly, editor of the highly acclaimed BIV and holder of a BA in Eng Lit.
In segment one, she commented on the 0.1% rise in the Cdn new HPI (for Jan) and implied the housing market had “reversed a downtrend”. She also mentioned the Cdn$ and how “it rose five cents” yesterday. How sad. Colorful, animated bar graphs (a la CNBC) were used in the presentation to drive home the point that home prices are still way higher than they were in 2009. The year 2012 was conveniently omitted from graph #1 so as to mislead the public into believing the upward trajectory is still intact. graph #2 was equally laughable with price chg’s in Vanc, Vic, Wpg and Cda average all appearing to be gains with upward pointing bars.
In segment two, she talked about how hot the commercial RE was, that land was in limited supply and that investors were “snapping up anything and everything”.

– from bullwhip29 at VCI 15 Mar 2013 9:55am

..AND MASSAGING:
BTW, they changed the headline of the Tara Perkins article in the Globe from this…
Real estate market outlook cools as home sales plunge
To this…
Clouds gather over Canadian housing market
There….that’s better.”

– from kabloona at VCI 15 Mar 2013 11:01pm

REALTORS STILL PUTTING ON BRAVE FACES:
“BC home sales continued at a modest pace in February,” said Cameron Muir, BCREA Chief Economist. “Despite improved affordability, many potential buyers and sellers remain in a holding pattern. With pent up demand now becoming latent in the market, it’s not a matter of if, but when home sales rise above their current pace.”
BCREA news release 14 Mar 2013

First Time Buyers – “I have spent several years saving up enough for a reasonable down payment, but have now determined that in the current market, it just makes more sense to rent.”

“The biggest challenge I face is affordability,” said Dustin Strong, a 34-year-old Vancouver renter looking for a home in the $500,000 range. “I have spent several years saving up enough for a reasonable down payment, but have now determined that in the current market, it just makes more sense to rent.”

When the Globe and Mail asked readers in an online poll whether Ottawa should make it easier for first-time buyers to enter the real estate market, only 40 per cent of the nearly 2,500 respondents said yes, first-time buyers deserve a break.
“First-time buyers have all-time low rates, realistic 25-year terms, and minimum 5-per-cent down payments,” one reader wrote in our comments section. “If they can’t afford it, then the prices are too high. The hurdle is low enough for Canadians.”


Market uncertainty and bubble-talk are also holding buyers back, said James Ellis, a 26-year-old looking for a house in Kingston, Ont., with a $250,000 budget. His biggest challenge, he said, is “determining if the value of a house now is inflated or not, and whether resale value in a few years will reflect the current value once the housing market equalizes.”
“Our main challenge is beating the fear of home prices falling on us,” added Joseph, a 28-year-old looking for a detached house in Calgary. “That is what has kept us renting.”


– from ‘What first-time buyers really need: affordable housing prices’, Dianne Nice, Globe and Mail, 12 Mar 2013

There is absolutely no reason that anybody anywhere in Canada should be rushing to overextend themselves into RE, least of all First Time Buyers, and especially in Vancouver.
Prices are headed down.
Interesting statement from Joseph in Calgary: Instead of fearing being priced out, he is fearing buying and having prices drop.. this represents a change.
– vreaa

Realtor Tries To Sell Own Home But Can’t – “Buyers are very skeptical, very hesitant because they think prices may go down.”

Hoda Seraji is experiencing Vancouver’s housing slowdown firsthand. A real estate agent, she took her own family’s two- story house in Canada’s third-largest city off the market after failing to get a single bite for the C$2.39 million home overlooking the Pacific. Cutting the price for the five-bedroom, four-bathroom residence didn’t help.
“Buyers are very skeptical, very hesitant because they think prices may go down,” she says.
Seraji blames fading interest from foreign investors, especially in China. Changes to Canada’s mortgage rules designed to cool the market have accelerated the sales drop, she says.

– from ‘Canada Losing Debt Halo as Bull Market Housing Peaks With Carney’, Bloomberg, 26 Feb 2013 [hat-tip Nemesis]

Agreed, “buyers are hesitant because they anticipate prices are going to drop”.
The problem is not with the buyers, but with prices that are still very, very overinflated.
What was that “C$2.39 million home” selling for just ten years ago? Less than $500K, most likely.
Because of the very large speculative component to price in Vancouver, price drops will not draw in demand, but rather beget further drops.
– vreaa

“Where in the world would you pay $888,000 to live in this beauty?”

v988743_1

242 E 48th Ave, East Vancouver
2619 sqft
[really? -ed] Old-timer SFH, 33×140 lot
For Sale: Ask price $888,000

MLS®: V988743. Blurb: ‘Amazing property including legal basement suite. Some updating to electrical, and plumbing. Over 2600 sq ft of living space. Some hardwood floors, wood burning fireplace, newer deck, garage, 9 bedrooms [surely not! -ed.], 5 baths on 3 levels. ***close to all amenities and all levels of school including Langara College. All these on a great southern exposed, oversized lot. Well Priced,ASSESSED VALUE $865K.GREAT INVESTMENT WITH REVENUE POTENTIAL****NEEDS A LITTLE TLC’

Hat-tip to ‘Pretzels…thirsty’ for popping this example up in a recent thread and who added: “I think there should be an open web survey for this.
“Where in the world would you pay $888,000 to live in this beauty?”

This entire house looks like a bad basement.
One can only imagine the threat to one’s morale if you ended up an occupant of one of those 9 bedrooms.
– vreaa