Crucial Question: Will People Be As Eager To Buy Homes If Prices Are Flat Or Dropping?

2017-jan-change

The average price of a Canadian home sold in January was $470,253, just 0.2 per cent more than the same month a year earlier.
The Canadian Real Estate Association reported Wednesday that sales were down by 1.3 per cent during the month, to the second-lowest monthly level since the fall of 2015.
New government rules designed to crack down on speculation in the mortgage market came into effect in October and January’s numbers suggest they appear to be working.
“Canadian homebuyers face some challenges this year, including new mortgage rules that make it harder to qualify for a mortgage and regulatory changes that will push up mortgage financing costs,” CREA president Cliff Iverson said in a release.
“It will take some time to gauge the extent to which these challenges will weigh on home buyers in different housing markets across Canada.”

‘Average Canadian house price barely increased in past 12 months’, CBC 15 Feb 2017

Longtime (and long-suffering) readers will recall that our premise has always been that, in markets such as Vancouver, people have overextended themselves to buy homes at prices far above fundamental value because they anticipate ongoing outsized future price increases. This is why we have called all buyers ‘speculators’. A significant price stall or pullback will test this hypothesis. Will buyers still be eager to overextend with the prospect of ‘barely increasing’ prices in future?
Speculators are almost all momentum buyers; they hate assets that are falling in price.
– vreaa

A Real Estate Economy – “Real estate inflation in the Lower Mainland in 2016 is greater than the entire provincial GDP — the actual goods and services produced by all British Columbians”

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Whether we like it or not, B.C. has basically become a real estate economy. The BC Assessment office recently released numbers for 2017 showing that property values ballooned by a staggering $332 billion — 25 per cent — last year. This figure is more than five times the economic value of all goods-producing industries in 2015 combined and nearly double the size of our entire service sector that same year.
Not surprisingly, 90 per cent of the increased values from last year’s property gold rush were in the urban land bubble in the Lower Mainland, which increased by $298 billion in 2016. Real estate inflation within this tiny area, representing just two per cent of B.C.’s land area, eclipsed the entire provincial GDP — the actual goods and services produced by all British Columbians in 2015.
But is this real estate wealth actually real?

– excerpt and image from ‘We’ve Let Vancouver Become a Playground for Plutocrats’, Mitchell Anderson, The Tyee, 31 Jan 2017

No commentary required. – vreaa

Eight of the Top Ten Donors to the BC Liberal Party are RE Industries

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– from The Vancouver Sun, 17 Jan 2017

This requires no commentary. – vreaa

CTV Headline: ‘All hell is going to break loose in Vancouver’: Ex-trader’s real estate forecast

“A man who made millions as a short seller on Wall Street by betting against the odds has turned his sights from the U.S. economy to Vancouver real estate.
Former trader Marc Cohodes spent decades betting against housing “bubbles” before they burst. Now he has his eye, and his money, on the local housing market, and he has a warning to homeowners and first-time buyers.
“It’s going to blow to complete and utter smithereens,” Cohodes predicts.
“I think the market probably topped in the spring of ’16 and I think all hell is going to break loose in Vancouver in 2017.”
Cohodes is so confident in his prediction that he’s betting against one of Canada’s biggest alternative mortgage lenders, forecasting a housing crash similar to the one south of the border in 2008.
“I witnessed some of the U.S. housing fiasco here, and I said to myself, if I ever see it again, I should speak out louder than I did,” he told CTV’s Sarah MacDonald.
So this time he’s speaking out, and his predictions are drastic.
Cohodes, who is now retired from trading, predicts that all of Metro Vancouver’s multimillion-dollar homes will see their value plummet by as much as 50 to 80 per cent.”

CTV News, 30 Dec 2016

This happens regularly — Somebody from ‘the outside’, with knowledge of markets, takes a look at Vancouver RE and sees how much of a bubble it is… they rant about it for an article or two… then nothing proceeds to change. Robert Shiller called Vancouver the ‘bubbliest city’, what?.. 10 years ago? And we’ve regularly seen traders like Cohodes try to find ways to short our RE.
One of these days, one of these guys is going to get the timing right.
[Implied comment/joke about the challenges of timing markets intended].

RE matters aside, have a really good 2017, everybody. – vreaa

Vancouver Sun Headline: “Vancouver real estate prices face double-digit drop in 2017: LePage”

“The forecast for a double-digit price drop in Vancouver’s housing market makes for a nice or nasty surprise for 2017, depending on where you are on the property ladder, but experts say it still won’t make the city affordable.
Royal LePage CEO Phil Soper said prices are headed for double-digit decline in 2017 as buyers drop out of the market.
“Home prices had got so out of whack with the growth in underlying wages and salaries that there had to be a correction,” said Soper. “And it’ll happen in 2017.”

– ‘above the fold’ front page headline in The Vancouver Sun, 22 Dec 2016

A realtor citing fundamentals. Times are indeed changing. – vreaa

CTV Vancouver Uses ‘Prices Plunging’ In News Headline

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Sober hosts

Listing prices for detached homes appear to be falling as Vancouver’s real estate market faces what an expert calls “significant headwinds.”
Data released Friday showed that those looking to buy a single family detached home in the city last month forked over about $1.5 million in Metro Vancouver, but recent listings suggest that the benchmark is falling.
CTV News found a number of East Vancouver homes priced under then $1 million mark during a search of MLS listings on Monday, including one that sold for $560,000 below the initial asking price.
That home, located in Renfrew Heights, was initially listed at $1.36 million in August, but sold for $800,000 in mid-November.
Sutton West Coast realtor David Hutchinson has been tracking plunging prices and found several detached homes listed below $1 million, some of which had been recently renovated.
“If you want to sell, you have to be priced sharply, and you see a lot of price drops,” Hutchinson told CTV.

– from ‘Prices plunging: Houses selling well below asking, some under $1M’, Penny Daflos, 5 Dec 2016

Sales have slowed and prices are beginning to soften. Fundamentals remain shockingly poor, and there are ‘headwinds’ like rising mortgage rates and financing restrictions. 2017 will tell whether this is the beginning of the crash we’ve expected for years. – vreaa

Young Canadians And Homes – “What happens if we all decide we can’t afford this shit?”

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VICE: People often choose buying over renting because there is stability and community for family life. What changes when we stop buying houses?

Milevsky: We suddenly lose the stickiness of our labour force. It’s very important for Canada to have more than just high wages keeping us here. The last thing we want is to be a commodity labour market. What’s stopped us from doing that is the connections we’ve had to our community. If the younger generation sees housing as unaffordable and uninteresting they’re more likely to move internationally.
People may lose their anchor to a particular geographic location. I want my neighbourhood park to be clean and green and well maintained. If I just live their temporarily, do we lose our interest in the environment beyond our immediate needs? There’s also the transient nature of politicking. Who are your constituents if communities change?


Kershaw: If you opt out of home ownership, you opt out of the most secure opportunity for starting families and to have your kids in the same school, childcare, and community. Home ownership has also been a route to get access to the ground and playing outside. Renting in bigger cities is not having the kind of stock suitable for families. Big cities aren’t losing 20 somethings, it’s when the biological clock starts ticking you see a bit more of an exodus.
If renting is going to become a common practise for adults, systems such as childcare need to be improved. I’d like my child to be in the same childcare space for a few years. I don’t want to move around from neighbourhood to neighbourhood because I’m being evicted because my landlord can make more on other renters. We need to think about how renting can create that kind of security.

– from ‘What Happens if Young People Never Buy Homes?’, Samantha Power, Vice, November 27, 2016