A Weak March – Inventory High; Sales Low

Greater Vancouver RE inventory is now 16,298, a record historic high for the month of March.
Sales for March 2012 were 2,934 , down 28% YOY (cf Mar 2011), the second worse March sales for 10 years (second only to 2009).

– numbers and chart care of paulb, b5baxter, VHB, VMD, and others, at vancouvercondo.info; noted here for the chronological record.
—-
UPDATE regarding Detached properties
(from numbers posted at yattermatters):

Detached Prices:
FLAT YOY
(Mar 2012 $1.155M; Mar 2011 $1.155M)

Detached Inventory:
+22% YOY
(Mar 2012 6258; Mar 2011 5365)

Detached Sales:
-34% YOY
(Mar 2012 1187; Mar 2011 1799)

Bearish. – vreaa

88 responses to “A Weak March – Inventory High; Sales Low

  1. Basement Suite

    “Sales for March 2012 were 2,934 , down 28% YOY (cf Mar 2011), the second worse March sales for 10 years (second only to 2009).”

    Portends another 2009 bounce? After all we’re not even as bad off as 2009 and that little dip was not exactly the great correction we (us bears) had been waiting for.

    “Greater Vancouver RE inventory is now 16,298, a record historic high for the month of March.”

    On the other hand, this variable looks more promising. 2012 should be fun to watch from the cave. Lets see if there are enough greater fools left to snap up the “deals” when prices drop 10%.

    • We don’t see any reason for another “2009 bounce”.
      That bounce only occurred because the cost of borrowing had rapidly been made much cheaper.

      • Basement Suite

        But mortgage rates remain WAY below 3%, at all time lows.
        http://www.bestratesbc.com/
        Money remains stupid cheap, the air in our bubble.
        The only glimmer of hope I see is the inventory.

      • It’s not the rates, it’s the rate of change of the rates.

      • Basement Suite

        I understand that is your opinion Vreaa, but I believe it is continued free money as much as the process of freeing the money. At current mortgage rates <3%, a sensible price on a house would require incredibly low monthly payments, hell *I* would consider buying 3 or 4 houses, or at least 1, and fast. Low interest AND sensible prices??? Where do I sign, seriously! Ergo, prices rise fast, BUBBLE. Prices quickly become nonsensical. At continued sub 3% mortgages, we are begging to perpetuate this thing, prices cannot become sensible because renters will buy way before that happens, and we get another 2009 bounce. Borrowing money should not be free indefinitely or RE bubbles happen and they don't necessarily go away on their own as long as rates remain so stupid low, sub 3%. Yes it is possible, so as I have said, lets hope I'm wrong, since obviously rates aren't going up substantially this decade.

      • “It’s not the rates, it’s the rate of change of the rates.”

        First and second order derivatives?

      • Don’t get us started on derivatives.

        😉

      • Hopefully this historical chart will help, Basement.

        http://en.wikipedia.org/wiki/File:Federal_Funds_Rate_1954_thru_2009_effective.svg

        Take a hard look at the Federal Funds Rate and notice the cycle as it rises and falls over time. We are certainly at a low. There is no question about that. But after reviewing the basics of the chart itself and after noting how rates rise and fall over time, where do you think we will go next? (hint, look at 2012 and where we currently are in the cycle)

        Pretty obvious is it not?

        It should be clear to even a casual observer that following a period of rate declines that there will be a reversal and rates will rise. This is our reality. Note each prior incidence of rising and falling rates along the chart too. You can easily see that there is some symmetry in the graphic and this is where you can begin to understand what is coming next and get comfortable with it.

        Rates are set to rise. Perhaps dramatically.

        It does not matter what Ben Bernanke or the Fed claim is the agenda nor even how the ECB sets policy and lends cheaply. Those are not your rates anyway. In the end the bond markets will ultimately decide. They are in fact deciding now. Rates are on the increase because the bottom has already been plumbed and the chart tells us beyond any shadow of a doubt that there is only one direction for interest rates to move in the near future.

        Up, up and away. And that will really hurt housing prices.

        So relax. Just save and be ready. Housing could plummet in some areas.

      • Basement Suite

        “Rates are on the increase because the bottom has already been plumbed and the chart tells us beyond any shadow of a doubt that there is only one direction for interest rates to move in the near future.”

        Farmer, your words are a soothing balm, if only I could know they were true. I do hope you are right. But the bond market is influenced by the fed(s) trying to keep rates down. Everyone including central banks acknowledge that they influence mortgage rates, except those who frequent this blog, who think the two are wholly independent. Until I see Canadian mortgage rates above 3% again, I just don’t buy it. Not only that, but look at what I am asking as a first baby step: “above 3%” like that is some kind of great progress!? How low we have sunk. Lets see 6% (also historically low yet more than twice mortgage rates today, and clearly a LONG time off). We hit 6% one day in the far distant future, and I will start to think there is real hope.

        Meanwhile, HELOC anyone?
        http://www.bestratesbc.com/

      • Basement Suite

        P.s. I appreciate the post though Farmer, and as I said I do hope you are right. Lets watch and see.

      • Don’t worry about anything Basement. Keep your confidence up. You have been on the right track all along. You doubt. That makes you a true contrarian. From your past posts I understand you are a saver and waiting for an opportunity to buy. That day is coming. Just understand that real estate cycles are long and it will seem an eternity before the perfect moment comes. If you use your head you will be able to buy at a perfect bottom and set yourself up to sell later in life at the next top.

    • These slight downturns help to firm up the market and realign inventories with potential new buyers that are lurking out there. The cost/benefit analysis when extrapolating the hypotenuse of curves and income/interest ratio fancy graph gini co-efficient contango of a basis applicator clearly demonstrate a return of sinkage of 3% over 185 years. This is the time to buy!

    • I have to agree with VREAA. It is the changes in the rates that matter. We have been chugging along at low rates for a while now and all we have seen is worsening sales and increasing inventory. The biggest issue we have right now is.

      1.) Condo prices are flat so move-up buyers have little equity and no big levereged gains to get into something bigger.
      2.) Incomes are flat. Those people under #1 are largely in the same position as 5 years ago.
      3.) Ownership rates are at all time highs and thus the pool of buyers are up
      4.) Net migration to BC is low now. We may even start to have net losses to other provinces and international migration is being a bit more restricted.
      5.) Sentiment is changing. Look at the low sales volumes – in peak Spring period even. Wait until May when we finally fall below the 2009 trend line. the only question now is – will 2012 be worse than 2008 at least until fall?
      6.) CMHC cap has not been lifted and th banks have less liquidity now. You will see banks be selective on who they lend to now and rate specials will come off as the banks manage risks within their loan portfolios.

      We will now see the inventory top-out a bit. As I posted in the other blog yesterday, the momentum of the inventory invcreases gets harder to maintain the higher it gets. With constant expiry rates, the higher we get, the more expriries we have every week. Without a corresponding increase in the net number of listings each week, it’s hard to maintain the level.

      Basment Suite – I like your thoughts but really, this market is dead. No more ammunition or tools to make this market go up. it’s just whether or not we will see some quick decreases or if it will be a 10 year slow deflation. Either way, today’s buyer will be the greatest fool.

      • Basement Suite

        I respect both your opinions, and I know I am in the minority here. I acknowledge it may decline from here. But the 66% minimum to get back to fair prices, without a substantial rate hike? No way, for the reasons I stated above. Most people care only about their monthly payments.

      • “Most people care only about their monthly payments” as long as prices keep rising. There appears to be no risk to buying — the only question people ask themselves in such a market is how much they can afford each month. Once the information that prices are no longer rising, and in fact are falling (even a little), permeates the market, buyer psychology changes and things get non-linear. Some people will “buy the dips,” but they will be smaller in number than those who have been buying or wanted to buy in recent market conditions.

      • zhr2yvr, I agree generally with all your points, especially with the inventory numbers, however I think that despite all these factors it will be lending being crimped that will send this market into the toilet. We have examples in other locales of speculative excesses far exceeding those of Vancouver; if lending weren’t crimped it could easily become even more stratospheric — witness Ireland or parts of the US in terms of price-rent insanity that dwarf(ed) even Vancouver. We all know how those turned out and I don’t think either the Bank of Canada or the Department of Finance are ignorant of where things are headed without geography-specific controls.

        I’m watching OSFI directives like a hawk, and keeping my ear to the ground about geographic-based lending crimps starting to filter through the Big5 chains of command in the coming few quarters.

      • Exactly, interest rates only part of the story. Money may be free right now, but money is also free in the US (and you get to lock it in for 30 years). Things like availability of credit (plentiful) and lending criteria (eliminated) have played a major part in the last few years, particularly the 2009 reversal.

      • grasshopper: “all eyes are on the rates. ”
        master: “but the casino must go on.”.

        Quote of the day – March 31st, 2012
        Bo Xilai and his wife Gu Kailai. Bo is believed to have been China’s first “naked official,” referring to a cadre who has moved his spouse, children, and assets abroad. Bo owns numerous properties in New York, Hong Kong, Singapore, and Vancouver.

      • That is a really interesting point Canis. Prices only need to start falling “just a little” to change the whole psychology of the market from one of bullishness to a bear.

        We are already there in many towns and cities across the province. Sentiment is changing before our eyes because prices are already in reversal.

        The anomaly of a few exceptions where home prices get bid up in panic-buying wars does not change the big picture one iota. This market has already rolled over but too few yet recognize it for what it is. R/E is now in decline. The bubble has already popped.

        You can probably appreciate why the Federal Government was unwilling to bring in harsh medicine for housing in this weeks budget. What would be the point? If the patient is already sick in declining health then it helps nobody to inflict even more punishment as a means to a faster cure.

        Sometimes no action is the best course to take.

  2. weekend funnies

    • “There is no more deadly weapon system in the world than a Russian with two AA-12s..” … “cool”..
      Thanks for that.
      Supplies:
      Tinned food, water, gold, a pair of AA-12s, and a Russian.

    • Renters Revenge

      My son tells me there is also a video of the “professional Russian” driving a tank through a McDonald’s drive thru. I didn’t bother to look it up – I can only imagine.

  3. Reminiscent of a favorite song of mine:

    “I can see the buzzards I can hear the crows one more minute to go
    And now I’m swingin’ and here I go-o-o-o-o-o-o-o-o-o-o-o-o!”

  4. I totally agree with Canis.
    Who cares how many listings there are. What really matters is the average selling price, and that is still rising or at least remaining very high.
    I hate all the statistics you see in the media, only price counts for anything.

  5. An fastly increasing number of listings is what leads to “new prices,” also known as reduced prices, on those burgeoning listings, which leads to a lower average selling price. You can’t disconnect these three things.

  6. Absolutely love this chart. It speaks volumes without even a single word of explanation needed.

  7. Vreaa,

    I respect what you’re trying to say, but I’m afraid that much like the bulls – you’ve fell into a trap. That trap is the belief that real estate is much like any other product on the free market – that bends according to supply and demand. The bulls argue “we don’t create more land,” the bears argue “we have a surplus of houses already,” both camps fail to acknowledge that real estate has rarely been free market driven. Suffice to say, since the dawn of time, real estate has never been and never will be a free market. I would classify real estate as a religion that’s played – and a satanic religion at that.
    In my area (Dartmouth, Nova Scotia), every third home has been on sale FOR YEARS, yet prices never decrease. Why? Because the sellers can simply wait out for eternity in the unlikely event they may cash in on their lottery ticket. The home is used as a lottery – not shelter. I can only imagine how much worse this is in Vancouver.

    Until property taxes or interest rates are seriously raised; I’m afraid there’s nothing stopping sellers from holding onto their properties at ridiculous offering prices until death. This has been my frustrating experience first-hand trying to buy that first home – usually from the selfishly driven and stubborn baby boomer generation who never know shame.

    Real estate prices depend completely on the emotional and financial stability of the sellers. Sellers, not buyers, control the “market.” Prices only become truly market driven once the seller feels a financial pinch due to being unable to sell the home. Unfortunately, low property taxes and interest rates can make sellers hold out indefinitely. This creates a lot of inventory, a lot of hype, low sales volume, and uneventful sticky prices that may occasionally go down a marginal 2-3% year after year. The real estate market in my area is essentially “stuck.”

    This is not a free market – tuck those supply and demand charts away – they’re meaningless in a market driven by the religiosity of the sellers.
    In order for real estate to be truly free market driven – people need to lose money by not generating sales like any other business; rather than having the off chance of gaining money due to increasing “land values.”

    This means taking in some of the advice from our Native American friends. Mainly that attaching human monetary value to land is a stupid idea. The natives were not anti-capitalists, in fact they were heavily involved in trade and commerce, but they were strongly opposed to the concept of “land values” and even went as far as to prolifically warn us that adopting such a concept would inevitably destroy our empire.

    • DonDWest -> Thanks for the comment.
      We have to respectfully disagree in a number of ways (but agree in some).

      We agree with you about the emotional component of RE.
      We know that sales can be sticky on the way down; sellers may sit and look at each other for long periods.
      But, let’s consider the position of the seller.
      If they are somebody with no mortgage, not a large percentage of their net-worth in the value of the property, no death/divorce/migration forcing their hand, then they may be able to sit and wait. In the cases you describe, for years.
      But, if any of those (or other) factors apply pressure, they may be less sanguine.
      For instance, in Vancouver, many, many owners have more than their entire net-worth in their primary residence; often with leverage; often when the owners are in their 50s or 60s or even 70s. In other words, their financial futures are very, very dependent on the value of that piece of RE.
      In addition, there are many who have second or third properties that are not cash flow positive but which they are holding on the premise of rising prices. There are also bald faced flippers holding RE.
      Now, consider all those owners… consider how they will all feel in a stagnant market… month after month…. Worse, how they will feel in a market where modest but definite price declines declare themselves…
      Our thesis is that they will experience increasing pressure to need to sell…

      So, yes, the supply/demand curves are very non-linear; beliefs about RE are, indeed, held with religious fervour; sellers can be ‘sticky’ in the early stages of a bear market…
      BUT, once the scales fall from their eyes; once they hear the trumpets; once they see the writing on the wall;…. Armageddon.
      The high emotion that leads to the powerful bull can be just as fervent on the way down as on the way up.
      In fact, we’d hypothesize that Vancouver has to go through just such a phase of high emotion on the way down to flush out the animal spirits and truly end the mania.

      Remember, the Spanish, the Irish, the Japanese, (your choice of other nation here) all had the same reverence for land that you describe… yet that didn’t stop them from experiencing RE crashes.
      Land can be revered one day, and dirt the next.

      • More than 6 years after the US housing bubble burst and we are just now seeing the first real signs of capitulation. Market participants have finally given up and accepted lower prices. Vendors are selling for a wide variety of reasons including age, ill health, necessary moves, family breakup and other financial pressures.

        They could hold out for high prices. Just not forever.

        And that is what capitulation is all about. It is surrender to an unforgiving sales environment. I will agree with you Don.D. that this can take a long time. It never last forever though and if you are a prospective buyer it will pay you tremendous dividends to be patient and wait for that moment before you make an offer.

        Capitulation is coming here too but it is still many years off. Patience.

        Definition of capitulation in stock markets (still applicable to housing)
        http://www.investopedia.com/ask/answers/189.asp#axzz1qlGircRb

    • Don: BTW, when you say “..attaching human monetary value to land is a stupid idea”, I suspect you may be able to see that that is classic bubble talk.
      Think tulips, and internet.com

  8. DonD

    You almost convinced me…almost, but cheap credit has caused people to over extend themselves. A lot of people did this. Many people don’t need an interest rate increase to be in trouble. They’re already in trouble. And there’s a lot of them. The credit pullback has chosen its victims. Sure there are people who can hold out forever, but they’re not going to set prices. Why? Because as you’ve said, they won’t sell without a pie in the sky offer. It’s those already in trouble that will bring prices down from desperation. When they sell lower and lower, the sale price they accept becomes the market value of those who can “hold out forever.”

  9. Joe_Blown_Away_By_High_Housing_Costs

    Condo development on publicly owned land is increasingly being seen as a way to generate revenue for government agencies.

    SFU is doing it, with the development of the UniverCity condos.

    UBC is doing it with condo developments on university land.

    BC Housing is doing it with the Little Mountain redevelopment.

    There was talk a few years ago of Translink doing it — building condos adjacent to skytrain stations to raise money for the transit system.

    Now, it may be starting with the Vancouver School Board. Unaffordable housing in Vancouver is forcing many families with kids out of the city. That means declining school enrolment. But the school board remains desperately underfunded. Vancouver schools occupy large tracts of real estate in highly desirable locations. So you have empty schools, stressed budgets, and real estate holdings worth big bucks if converted to residential condos–Vancouver’s schools are ripe for redevelopment into condos. This creates a positive feedback loop. The condos built on school lands will be unaffordable to Vancouver families. All the development will drive housing prices up even further. More families are forced to leave Vancouver. School enrollment continues to go down and building operations efficiencies continue to deteriorate. Pretty soon virtually all the schools are turned into condos that sit empty, owned by speckers.

    Schools are the hearts of our communities. If anything good comes from the impending RE crash so many on this blog are anticipating, one of the best outcomes will be government agencies will no longer see condo developments on their real estate holdings as a way to print money.

    http://www.vancouversun.com/news/Cash+strapped+Vancouver+school+board+eyes+property+development/6388994/story.html

    • Stop giving the developers such good ideas, Joe. Next thing you know they will be tearing down the school for the deaf at Jericho and putting up a bunch of swanky seaside condos for the old farts (who all hate kids anyway!).

      Is that school still there btw or has it already been sold to condo dev’s?

      Maybe I will check it on Google Earth

      • The Jericho lands are the subject of a native land claim (along with the military base adjacent). Nothing will be done in the near term until that is settled – word is the band wants to build a casino there, along with condos.

      • Wow! Thanks for the update Observer. I had no idea. It used to be military barracks when I was a kid. The concerts and live music venues inside the old hangars were amazing. Then the tore it all down!!! You should have seen it then. Everyone was there playing music. Joni Mitchell came and dozens (if not hundreds) of other acts showed up. My best summers ever. Cripes, it cost almost nothing and we were all happy. I was unaware that a native band laid claim to the whole area. You mean the parks too? So what about the school for the blind/deaf? Is it gone now too?

        Next thing, they will demolish Kits High School. Put condos there for dead scholars. Good land. Nice location for old farts to walk dogs. Bye bye students.

      • School for the deaf hasn’t been there for over 20 years – it’s now Point Grey Academy (school of choice for the spawn of Christy Clark). The base is still there but not much going on – officers’ mess is still going strong. The hangars haven’t been on the beach side for at least 30 years – Habitat was their swan song. The pier/landing strip was demolished this year. The area on the north side of Fourth is a designated park – the land claim is for the area west of Alma and on up the hill.

  10. The rate of increase of inventory is also decelerating. In other years it has been linear or accelerating.

    • What inventory chart you looking at? Your comment certainly doesn’t apply to the chart posted.

    • Anonymous was imprecise, but I think I know what he’s trying to say.

      He said “the rate of increase of inventory is decelerating”. The word “decelerating” typically refers to a negative second derivative. However, he applied it to “the rate of increase”, which is itself the first derivative. So he is asserting that the third derivative is negative. I don’t think the chart is precise enough to make such a pronouncement.

      What I think he meant to say was “the rate of increase of inventory is decreasing”, i.e., the second derivative of inventory is negative. In other words, the recent inventory graph is concave. That looks to be correct.

      I would say, looking at the early spring:
      2012: concave
      2011: concave
      2010: slightly convex
      2009: concave (and already decreasing)
      2008: convex
      2007: possibly slightly convex
      2006: mostly flat

      It think it is accurate to say that 2012, 2011, and especially 2009 went concave noticeably earlier than the other years.

      • I think you have got it right Jeff.

        Deceleration is a slowing and not the same as a decline. You can still have growth even with a deceleration in progress. Perfect example is that Chinese GDP growth has fallen from 13% four years ago to the current 8.3%. This is expected to fall to 7.5% in the coming year.

        What the hell?

        Yup, that’s right. GDP is in decline yet the economy there continues expansion. Growth has certainly not gone anywhere near to negative numbers like we see in Spain or Portugal or Greece. So only the rate of growth in GDP is actually falling. There is no doubt whatsoever that the Chinese economy is still expanding at the fastest rate anywhere on earth. So the slowing of growth is just a number relative to the speed of the expansion in the economy and it might not be such a big deal when looked at objectively.

        Now I am in the mood for Dim Sum

      • Thanks – I still see 2012 inventory as tracking the 2009 increase in inventory but at a higher level. Seems pretty reasonable given that prices have finally hit a level where everyone would like to sell but demand is declining. There are only so many HAM suckers it would seem. No it’s just a matter of waiting for the inevitable collapse of Vancouver’s economy.

      • Sorry, line colors difficult to see on my screen – it appears that 2012 is tracking 2010 but at a higher level.

      • That’s exactly what I meant, thanks Jeff.

        Inventory build-up is slowing, unlike other years.

  11. Hey guys, not only does it not really matter if the inventory is high, but who cares if the sales are also low.
    So, vreaa, I dont agree that “volume always leads price”. If the volume of inventory is high in Vancouver is has not changed the bull market of prices.
    Also, it hasnt seemed to matter here if sales crawl to a standstill (which is almost never).
    Look at the recent Rennie project which happened in the midst of all the inventory , 414 units sold in a single day, and 10000 subscribers to the project ! Who cares how many other crappy places are for sale, or if sales are low. How can you guys explain such a strong sales day in a vacuum of high inventory ?

    • Newbie bull-trolls. Like a lamb waiting for the slaughter.

      It’s not worth the effort, but I’ll take the first stab at it.

      “Hey guys, not only does it not really matter if the inventory is high, but who cares if the sales are also low. So, vreaa, I dont agree that “volume always leads price”. If the volume of inventory is high in Vancouver is has not changed the bull market of prices.”

      Hence the term “leading indicator”. Let’s see what happens to prices going forward.

      A good place to look would be Richmond. Their MOI is extremely high right now. There are anecdotes of price drops, but I wouldn’t say that is happening consistently. Over the next 6 months if we start to see noticeable, widespread price drops, that would be consistent with inventory leading prices.

      “Also, it hasnt seemed to matter here if sales crawl to a standstill (which is almost never). Look at the recent Rennie project which happened in the midst of all the inventory , 414 units sold in a single day, and 10000 subscribers to the project! Who cares how many other crappy places are for sale, or if sales are low. How can you guys explain such a strong sales day in a vacuum of high inventory?”

      You must watch a lot of Global. I suggest reading Chapter 1 of the Condo Marketer’s Handbook.

    • There are always exceptions to every rule Renx10. We don’t live our lives according to exceptions though. If we did we might barricade ourselves in our own homes every time a madman with a gun started shooting people in some far off foreign country.

      Intuitively we know that those acts of the insane are far-away events having little or no bearing on us personally. In truth, we all live by the rules of the average. We function according to the herd and right now the herd is still foolishly buying. Sometimes, the herd runs off a cliff and panic-buys its way right into the history books.

      Does that mean you should follow them though?

      God gave you a brain to think. Use it.

    • 4SlicesofCheese

      If you really think Gateway was sold out in one day to the hundred+ people that lined up, you really are delusional.

      Plus

      Granted

      N.Van, E.Van saw increases.

  12. Also Canis, no food bank for me. Even if my place loses 95% of value, Im still here with a zero mortgage.

  13. renx10
    1. It’s SALES volume that leads price (not inventory ‘volume’).
    2. The last word is that Marine Gateway’s 400+ units sold to only 130 buyers; and it’s unclear whether it is indeed “sold out” … you may see that as sign of market strength, we see it as thinly veiled weakness.
    3. “Even if my place loses 95% of value, Im still here with a zero mortgage.” If you don’t mind telling us, what percentage of your net-worth is in Vancouver RE?

    • “The last word is that Marine Gateway’s 400+ units sold to only 130 buyers”

      Maybe those buyers all bought adjacent units and are knocking down the walls. For evidence: 3 x 400sqft = livable space. But who needs 3 kitchens? Maybe they’re all chefs.

    • 2. Marine Gateway’s 400+ units sold to only 130 buyers;
      ———————
      They do keep a long list of “spare tires” in case some of the 130 decide to drop out.

  14. With regard to interest rate, it might look like everything is going well and rates will only go up slowly and 1 careful step at a time. However, things can also go the way of Greeks, Italy, Spain where you hit a bang moment and interest just zoom up. Even with the massive ECB intervention, Spanish rates are still going up and up. Canada is actually not better than Europe, in fact in one World Bank study, we are 1 of only 2 two countries in developed countries where total public debt, corporate debt, and private debt each exceeds what is deemed to be acceptable % level of GDP. Most of the crisis countries only had 2 out of the 3 sectors with debt exceeding acceptable % level of GDP.

  15. What were the reasons for the sharp increase in early 2008 compared to 2006-7? Wasn’t the market strong even in mid-2008?

  16. MM

    2008 was the first year in many where the volume slowed in spring. It was a terrible year and Instead of a great spring, it was a dud. This compares to 2009 which took off because of easing monetary policy. 2010 was the crush of post-olympic specuvestor listings and 2011 was the HAM invasion. This year – – nothing . . No credit easing, no HAM. High inventory. We are in a decelerating market with high inventory. This is quite similar to 2008. The only thing was 2008, it was somewhat unexpected while here – everyone should have seen it coming.

    It’s always interesting to read the negative headlines from the real estate board. Let’s go back to MArch 2008 through November and read the headlines from the REBGV press releases.

    “Housing market moderates for spring-time buyers…”

    “New listings outpace sales to start the spring cycle..”

    “Growing supply helps stabilize market conditions…”

    “Market activity offers awaited relief for homebuyers…”

    “Month-over-month housing prices retreat from record highs…”

    “Summer lull sees properties stay on market…”

    “Home prices adapt to affordability demands…”

    “Residential housing price decline creates buying opportunities…”

    “Slow home sales create window of opportunity..”

    ——
    Well – – where will we go from here this year? It could be similar – the only thing is at the end of this tunnel, it will not be lower interest rates pushing up prices.

  17. Craig Sterling

    I was in Dublin, Ireland yesterday – and saw something of a vision of the future, perhaps. Recall that in 2007, house prices in Dublin were higher than those in London (a little like Vancouver today). Two friends of mine scraped together everything they could find, including HELOC (as it’s called in Canada – Mortgage Equity Withdrawal, or MEW in Europe) on their two apartments to buy a tiny three-bed townhouse in a not-outstanding area for Euro 600,000. They then borrowed again to renovate.

    Fast forward five years, and all three of their properties — their townhouse and their two rental places — are in negative equity. My friends are 43 and 40 respectively, and will now consider themselves fortunate if they are able to sell for what they bought these properties when they retire in 22+ years’ time…. and two more stings in the tail?

    1. House prices are now down 50% in Dublin, and my friends think they have further to fall.

    2. Both were relying on property to fund their retirements. At the age of 43, my friend has just taken out Ireland’s equivalent of an RRSP because he knows/believes there is no conceivable chance that he’ll ever get sufficient wealth from his property portfolio.

    I know Dublin well and have visited there for years: I can well remember, in the early noughties, Dublin being referred to as the “Best Place on Earth”….. sound familiar?

    • Interesting. I’ve been following the property tax revolt. 1.6 million households now overdue. The Irish “light the fuse” on the euro debt bomb, say some number people. The govt says it will process penalties anyway. Are the Irish prone to round up politicians? I don’t think I’d want to be jamming tax increases down their mail slots.

      • The Irish are protesting paying about $130 per year property tax – they had no such taxes previously (not a tax increase, merely a tax). The government is threatening to base the taxes on property values starting in a couple of years.

  18. Interesting thread. I tend to think inventory numbers reflect last years projections. New builds are priced to what the perceived market will bear and projects are figured a year, six months in advance. People who are reselling go on the advice of others, expectations. People boast about their ask price.

    I’m intrigued by the buyer pool as an indicator. What is the buyer willing to bid? What’s the bank’s preapproval rate?. They know the population growth is slowing, 1.5% http://www.bcstats.gov.bc.ca/Publications/PeriodicalsReleases/PopulationHighlights.aspx
    And they have the data on % of BC households with mortgage/credit debt. They know sized of the untapped mortgage market and for some reason they are reducing staff (BoA ML Canada lady in previous post). How many bids and what was the close, will give a more accurate trend line, just like stocks. The chart above, seasonally adjusted, looks like miss fire for sellers expectations.

    I’d guess expect more and more retirees leaving the market, downsizing. Banks have to bring a new crop of debtors on board, but they are running out of debt room. The regulator’s perspective: http://saskatoonhousingbubble.blogspot.ca/
    and demand reduces

    and foreign investment is kind of unchanged, about 3 to 4 % says REBGV board president Rosario Setticasi last year. http://vancouver.openfile.ca/vancouver/file/2011/05/role-or-foreign-ownership-in-Vancouver-real-estate-market
    There’s about 150 ‘reduced’ listings on craigslist for the GVRD currently. Out of the volume that will sell over the next couple weeks—are the price reductions of 150 or so dwellings that significant? A price trend line would be interesting.

    If inventory grows, sure some sellers will offer discounts, but inventory grows based on last year’s numbers. The buyer pool is based on this year’s economic conditions.

    • debtless -> Great post; interesting to consider things from the buyer/lender side; and the time-lag on seller expectation makes intuitive sense (but we hadn’t seen it voiced like this).

  19. Hello vreaa, so what if only 130 buyers got all the units. The whole thrust of this website is that there is a bubble. Do we really care if one person bought the whole mess. It still sold. Im not saying things can go up forever, or even demand is high, but those units still sold.
    I would love to think there is an huge bubble waiting for a pop. I would like to buy some cheap property, but I already held my breath for 8-10 years the last time, and it just made me spend more on a property by waiting so long.
    Also, why does it matter how much of my assets are in my home right now ? Im going to keep living here even if the value of my property is $1000. I never plan on selling here and Im not going to borrow money from my equity, so screw it.
    As for everyone else, yes maybe a lot of standard rules of real estate are in play for a bubble to be ready to collapse, but , these economic standards are brought to you by the same economic theorists who didnt even anticipate the 2008 market collapse in the US.
    Therefore, not all places live by the same rules. If Vancouver had a market of 25000 homes for sale and no-one is willing to go down in price, then so be it. That seems to be a prevalent attitude of Vancouver property owners that I see.

    • renx10, to reply to your points (you bold, me italics):

      “so what if only 130 buyers got all the units”
      Big deal actually. Bulls constantly argue that RE in Vanc is held by ‘strong hands’, people who are using it for shelter and don’t care about market direction. Clearly these 130 buyers are not each intending to live in 3 units at Marine Gateway.

      “I would like to buy some cheap property”
      What you or I want has nothing to do with whether there is a bubble or not, nor does it exclude the possibility of a bubble.

      “I already held my breath for 8-10 years the last time, and it just made me spend more on a property by waiting so long.”
      So, you capitulated and got in late: same point – that doesn’t mean it’s not a speculative mania.

      “Also, why does it matter how much of my assets are in my home right now ? Im going to keep living here even if the value of my property is $1000.”
      You may, but many others will respond in a different way: it will likely matter to people, for instance, who are carrying $750K mortgage on a $900K property, who have no other assets and a net-worth, thus, of $150K (thus who are leveraged 6:1 RE:net-worth), who then proceed to watch their $150K “nest egg” evaporate, and then start going underwater… Many in this situation will bail. And it’ll only take a minority to crash the market.

      “.. these economic standards are brought to you by the same economic theorists who didnt even anticipate the 2008 market collapse in the US.
      Therefore, not all places live by the same rules.”

      Actually, the very same guys who correctly predicted the US housing crash are now predicting a Canadian crash.

      “If Vancouver had a market of 25000 homes for sale and no-one is willing to go down in price, then so be it. That seems to be a prevalent attitude of Vancouver property owners that I see.”
      That has been their attitude in a rising market. That’s easy!
      2008-2009 was barely a blip… before they could call their realtor, prices were recovering.
      Let’s see how sanguine they all are in a falling market.
      We’ll get a chance to find out soon enough.

  20. Hey Jeff Murdock – to you and your ‘A good place to look would be Richmond. Their MOI is extremely high right now. There are anecdotes of price drops, but I wouldn’t say that is happening consistently. Over the next 6 months if we start to see noticeable, widespread price drops, that would be consistent with inventory leading prices.”
    You know how many time I have heard baloney like,” over the next 6 months we will see price drops” in the last 25 years. What a load of shite, blah blah blah.
    Go back to Economics 101 yourself. I have been in business myself for 32 years and done just fine without studying stoneage economics.

    • “You know how many time I have heard baloney like,” over the next 6 months we will see price drops” in the last 25 years. What a load of shite, blah blah blah.”
      So, you believe this means that there will never be price drops?

      “Go back to Economics 101 yourself. I have been in business myself for 32 years and done just fine without studying stoneage economics.”
      Sure, because ‘new age’ economics has all the answers.
      Again, you must realize that calling basic economic principles “stoneage” is absolutely classic bubble-talk.

    • By the way, you misquote. I expressed no opinion on whether volume leads price. I proposed an experiment that aims to determine whether volume is leading price.

      You said “I dont agree that “volume always leads price”.”

      I said “Over the next 6 months if we start to see noticeable, widespread price drops, that would be consistent with inventory leading prices.”

      So, let’s see what happens in Richmond in 6 months. If prices haven’t dropped, I will agree that you were right: our high inventories did not precipitate price drops. If prices have dropped, then you were wrong (at least in this particular experiment).

      Well, these posts are all archived here, so in 6 months we’ll find out the answer. I’ll still be hanging around here in 6 months. Will you?

  21. As for interest rates. Im going to say right here that since we are getting around 1% return on our money right now, that interest rates will not go up significantly in the next 5 years.
    You dont need an economics degree to see this.

    • “…since we are getting around 1% return on our money right now, that interest rates will not go up significantly in the next 5 years.”
      Not sure if we understand the basis of your prediction.
      Why should low interest rates cause low interest rates?

      • I agree Vreaa, his patterns of logical deductions are risible.

        The only logical basis for his conclusion that I can see is the notion of a “ZIRP trap”. But that’s just stoneage economics…

    • Cdn 5 year market rates have been going up for the past 2 months if you haven’t noticed and are more likely to continue moving up based on numerous “economic” reasons that you obviously don’t care about because it appears that your forecasts are based entirely on what has happened in the past. Regardless, who cares if ZIRP continues – the cure for high prices is high prices even in your highly over-rated Vancouver.

    • Fundamentals of the market remain in place. Don’t bet on guided economy to stay forever.

  22. Hello vreaa,
    “so what if only 130 buyers got all the units”
    Big deal actually. Bulls constantly argue that RE in Vanc is held by ‘strong hands’, people who are using it for shelter and don’t care about market direction. Clearly these 130 buyers are not each intending to live in 3 units at Marine Gateway.
    Answer – So you think that it is all speculation and this is adding to your bubble. Well, the units still got paid for. I dont think it drove up prices any higher,and if these guys lose some cash, oh well.

    “I would like to buy some cheap property”
    What you or I want has nothing to do with whether there is a bubble or not, nor does it exclude the possibility of a bubble.
    Answer- I welcome a bubble and a much reduced price range, but I have not seen it happen and dont really see it happening. On another thread here I posted a basic upward movement of Vancouver prices for over 40 years. Im not seeing any changes in sight even with a few “financial indicators ” pointing that way.

    “I already held my breath for 8-10 years the last time, and it just made me spend more on a property by waiting so long.”
    So, you capitulated and got in late: same point – that doesn’t mean it’s not a speculative mania.
    Is that what this website is, worrying about some real estate honchos creating a speculative mania. Does anyone really care if some greedy bastards lose or make a few million ? That will happen in any market anywhere. Im arguing that real estate here will continue to hold value, or perhaps have a correction of up to 40% and then continue on its traditional upward march.
    Believe me , Im not on here for me and my greed or any kind of speculator. I truly wish prices were more realistic compared to other cities. On the other hand, did prices ever go down in San Francisco or the LA basin (downtown to Santa Monica) ? I would say, definately not, and if you had this same website there, then I would disagree with you.

    “Also, why does it matter how much of my assets are in my home right now ? Im going to keep living here even if the value of my property is $1000.”
    You may, but many others will respond in a different way: it will likely matter to people, for instance, who are carrying $750K mortgage on a $900
    K property, who have no other assets and a net-worth, thus, of $150K (thus who are leveraged 6:1 RE:net-worth), who then proceed to watch their $150K “nest egg” evaporate, and then start going underwater… Many in this situation will bail. And it’ll only take a minority to crash the market.
    Answer – fair enough. I will go along with your theory, but will that really lead to a crash ?

    “.. these economic standards are brought to you by the same economic theorists who didnt even anticipate the 2008 market collapse in the US.
    Therefore, not all places live by the same rules.”
    Actually, the very same guys who correctly predicted the US housing crash are now predicting a Canadian crash
    Answer- Really, there were very very few who did predict that crash. And now we see the majority of mainstream economic losers blathering about the same old capitalist bilge.

    “If Vancouver had a market of 25000 homes for sale and no-one is willing to go down in price, then so be it. That seems to be a prevalent attitude of Vancouver property owners that I see.”
    That has been their attitude in a rising market. That’s easy!
    2008-2009 was barely a blip… before they could call their realtor, prices were recovering.
    Let’s see how sanguine they all are in a falling market.
    We’ll get a chance to find out soon enough.
    Answer – falling market , falling market, falling market, the skies are falling , but they are not falling and have not fallen for a very long time.

    “You know how many time I have heard baloney like,” over the next 6 months we will see price drops” in the last 25 years. What a load of shite, blah blah blah.”
    So, you believe this means that there will never be price drops?
    Answer – bring on some price drops. Sure , there is a good chance things can drop, but they are so insanely high now that even a correction of 10-40% would not be so much of a kick in the head. Except of course to the losers who get in far over their heads. Hey, if you want to put down $5000 on a $500000 like in the old days, you are a fool.

    “Go back to Economics 101 yourself. I have been in business myself for 32 years and done just fine without studying stoneage economics.”
    Sure, because ‘new age’ economics has all the answers.
    Again, you must realize that calling basic economic principles “stoneage” is absolutely classic bubble-talk.
    Answer – oh my God, “classic bubble-talk” , how dangerous !

    “…since we are getting around 1% return on our money right now, that interest rates will not go up significantly in the next 5 years.”
    Not sure if we understand the basis of your prediction.
    Why should low interest rates cause low interest rates?
    Answer – Interest rates have not moved for years, any movement would screw the Canadian dollar and a whole lot more. We are already in a very very dangerous position with our trading with the US. I just truly believe and feel from experience that the interest rate is not rising for years. I would sooner expect a major real estate bubble around here.
    Do you really think the interest rate is going anywhere ??

    • The units offered in Marine Gateway are more suited for renters/investors because they are small and, with the exception of the retiree demographic, a stepping stone to a longer term tenured property.

      I also don’t think rates are necessarily going to go up in the next while but that’s not what will kill the market. I think it’s as simple as destroying access to credit. If I had the brains I’d look at 2008 and ask why the market imploded so significantly then; I really do think it’s banks shuttering their doors.

    • Yes RenX10. Rates are going to rise. We will see substantial inflation in the consumer economy first though before it is acknowledged…We are seeing that already but it is being suppressed for very good reasons…….but higher rates are coming just as surely as night follows day.

      Sooner than you think. So don’t get complacent about your debt.

  23. Well, what about a lot of buyers who dont need major financing ?
    The Asian market has a ton of very rich people. I know of three people from Asia who have bought in Vancouver years ago and never spend more than a month in Vancouver. And they are not speculators, just very well off and getting more well off.
    I really like this website because it has a healty negativity, I agree there is a bubble here, but popping the bubble will be very difficult.

    • The bubble already popped. You just don’t recognize the signs.

    • Where were these “very rich” people in 2008 when prices were dropping at double-digit rates? Vancouver, as a metropolis, is the fad du jour, and despite best attempts by pumpers, is and will continue to be owned primarily by locals. It’s only a few select areas where all the stories of “hot money” abound, the rest of the region is plain vanilla middle class.

  24. Hey Jessie, the very rich people of 2008 were getting kicked in the balls because of the world financial crisis , duh. It takes time to regroup when your portfolio takes a 10-50% hit, but that doesnt mean they are out of the game. Those kind of people usually come back with a frenzy after lower prices.

    • If you say so. Oh BTW the ball kicking took place in late 2008, TSHTF in terms of sales took place in early 2008. You’ve got your order backwards.

      I (finally) figured out what was really going on. I think it will be obvious in the next couple of years. Nonetheless best of luck with your investments.

  25. To Farmer, why would you worry about my debt ? Since I have none, I think I am doing things the old fashioned way, by not borrowing money. Make money and use that. Dont buy more than two places unless you can afford it. Also, buy the building you do your business in as soon as possible, your tenants will pay the place off in no time and you will have a free place.
    Also, to your “rates will rise”, your guess is a bad as mine.

    • Hey, don’t take it from me Ren. None other than Bill Gross (of Pimco fame) who runs the worlds largest mutual fund and is heavily into bonds was just saying three days back that rates have nowhere to go but up. His analysis is for rising inflation and even some economic recovery which I tend to agree with. In a normal world rates will adjust slowly upward over the next decade or more as we go into that part of the cycle. But the world is not normal and we should always be prepared for the potential of a rate spike.

      http://finance.fortune.cnn.com/2012/03/28/pimco-bill-gross-great-escape/

  26. Hey Farmer,
    Really , none other than Bill Gross of Pimpco, wow this guy is good. Is he one of those same idiot economic predictors that sells stocks and tells you to buy no matter what ? Is one of the millions of economic forecasters who totally miscalculated almost all of the economic downturns of the last decades.
    Even your article digs into him for not being very accurate.
    Also, yes even a kindergarden child can tell that when interest rates are close to zero, there is only one way to go from there.
    I think they will go up, but not for a while, and not in this climate of total economic fear by governments.

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