“Downtown condo sales are down dramatically. I can’t see buyers becoming more motivated because mortgage rates are already super-low. Sellers don’t really want to sell, because if they bought in the last two years they’re going to take a loss. If this continues, it’s going to impact prices. Only time will tell.”

“Downtown condo sales are down dramatically [YOY]… 23.5%… In 2011 Jan-Feb-March, we had 808 sales; in 2012 Jan-Feb-March, we have 619 sales. We used to have about 11.5 sales per day, now we have 8.5 sales per day… big changes.
But the pricing, as far as condo sales is concerned, hasn’t changed all that much…
Our listing counts are only up 5%; not a big deal right there…
But it goes to show you that people are not really motivated to buy right now…
And it goes to show you that sellers aren’t willing to drop their prices, and they’re not motivated to sell right now..
So, it’s a bit of a stand-off.. only time will tell if this is going to impact pricing… if people come more motivated to buy, or more motivated to sell… but as far as things are concerned right now, it just means activity is down…
Eventually, if this continues, it’s going to impact prices… and I can’t see it going up anytime soon… I can’t see buyers becoming more motivated because mortgage rates are already super-low… and sellers don’t really want to sell all that much, because if they bought in the last two years and they have to sell now they’re going to take a loss. So, it’ll be very interesting to see what happens in the next quarter.”

– Ian Watt, self-posted youtube video ‘Downtown Vancouver Condo Sales Down Almost 25% in 2012’, 9 Apr 2012

Nicely put (and, again, the gritty back-alley B&W production values are much appreciated).
This is exactly what’s going on across almost all property types and city regions at present.
Sales down; Inventory higher; Prices little changed.
A Vancouver stand-off.
Perhaps of particular interest to readers here is Watt’s observation that “I can’t see buyers becoming more motivated because mortgage rates are already super-low”. This adds some credence to suggestions (our own included) that the rate of change of interest rates is more important than the absolute rates themselves, and that limits can be reached even at very low rates.
– vreaa

25 responses to ““Downtown condo sales are down dramatically. I can’t see buyers becoming more motivated because mortgage rates are already super-low. Sellers don’t really want to sell, because if they bought in the last two years they’re going to take a loss. If this continues, it’s going to impact prices. Only time will tell.”

    • Renters Revenge

      Flaherty never replied directly to the letter I wrote him, but he appears to have read it.

    • nobody you know

      And it was at the Bush Center, as in George W., as in Mr. Reverse Midas Touch. Jinx!

      Quite the line up: Dubya, Chris Christie, Paul Ryan, “The Honorable” Karl Rove (yup, that’s how they listed Turd Blossom), Cato, Reason, Stephen Moore, Larry “There is no recession, the Bush Boom continues!” Kramer, and even John F@#%ing Stossel from Fox Business “News”.

      I mean, I know Jim Flaherty is a Conservative but this crowd is full on wingnut. They have no core beliefs beyond lowering their taxes. Their definition of conservative is the opposite of whatever Obama wants. That’s it. Total whackjobs.

      /politicalrant

  1. Who gets the screws turned first? My bet is the sell side. Just a hunch… Could be nothing

  2. There will be plenty of people who are able to sell into a declining market if buyers exist. They will be the ones to lead with the new lower pricing so there is not really any standoff at all. Those who bought recently will be stuck unless they capitulate to sell, pay off the debt or bankrupt. But what of the many others? The ex and I thought we had gone to the wall when we bought for 116 many, many years ago. That was a lot of money then. Now the neighborhood is moving for 1.5 to 2.0 so that is a long way from original investment price. Long time owners with no mortgage will move prices now and I can assure you all that prices will drop to get the sale. How the hell will they all retire and move to the Gulf Islands unless they cash out? The relative price is not really all that consequential if you still come out far ahead of the original inputs.

    • True.
      Remember, however, that people tend to think of the paper gains as ‘theirs’, and when a home bought years ago for $120K drops from recent peak valuation of $2M to $1.5M, the psychological focus for most is on mourning the loss of the imagined $0.5M rather than celebrating the $1.38M gain.
      It is likely we’ll see at least some owners in this situation hurrying to market, fearing the loss of more of their paper gains. Particularly folks such as those you allude to, where retirement comfort is dependent on the value of their home.

      • Exactly, Vreaa. That is our assurance that as declines proceed there will be a rush of listings to escape “before it is too late”. We are seeing limited signs of this already but the real eye-opener moment when supply overwhelms demand by a wide margin has yet to come. I think it is on the horizon now and those who cashed out already should be counting their stars knowing they made it out just before the gate closed on opportunity.

  3. Paul Streppel

    Mortgage rates are stable, no fire here, move along… except HELOC rates are dropping fast. Banks now struggling to keep the mortgage holders Other debt from imploding. Next to School Loans, HELOC debt becomes the twin towers of boomer self-actualizing illusion.

  4. “I can’t see buyers becoming more motivated because mortgage rates are already super-low…”

    A bottoming out of rates is going to strain the bubble as the next round of scraping the marginal buyers gets a heck of a lot more difficult.

  5. Well, well: http://themainlander.com/2012/04/10/the-persistence-of-anti-asian-racism-part2/

    “In 2010, the highest recorded purchases were from the United States ($7.17m) and Europe ($7.55m), while the highest Asian purchase was a Hong Kong owner, reaching $6.84m.”

    “58% of foreign-owned real-estate is American. Europe and the United States together account for 70% of all foreign-owned real-estate in the city, with the whole of Asia accounting for only 22%.”

    • If you follow the trail, that figure comes from this report: http://www.landcor.com/market/reports/Metro_Vancouver_2010_Report.pdf

      That report also concludes with the following remark:

      “Finally, people sometimes wait for the perfect opportunity to invest. The best advice for that would be: Don’t wait to buy land. Buy land…Then wait!”

      I’ll let you decide whether the data is trustworthy or not.

      • Ralph Cramdown

        Don’t wait to buy land. Buy land…Then wait!
        It’s a good dictum… usually. But it doesn’t say “condos,” “townhouses” or “large houses on small lots,” it says LAND, the kind that isn’t worth much because it’s too far from anywhere. Real estate consists of land and structures, and the structures are always tending towards zero as entropy and changing fashions take their toll.

    • I don’t get the article, it starts off with some bold assertions about race and parallels to anti-Semitism, then leaves the road and goes into some political scrub-brush.

      BC has an unproductive economy and is attracting hot capital into speculative assets in part because it lacks capital in other sectors. Now it has to produce some earnings from the bad investments — ruh roh! Don’t entirely blame the political masters and their string-pullers for a chronic productivity issue stretching back decades. They were dealt a bit of a Yarbough.

  6. Very interesting article on Zerohedge today.

    If you think that the US wont raise interest rates, well think again. The pieces are being put slowly bit by bit into place.

    Where should US treasuries be on a neutral setting. 400bps. Two year treasuries 5%.

    But after gorging out on cheap money how do they move back to that position?

    http://www.zerohedge.com/news/if-1951-accord-any-indication-treasurys-imminent-launch-floaters-will-be-signal-get-out-dodge

    [i]
    Might the U.S. Treasury go down a similar path again in conjunction with an eventual Fed exit strategy? In the current environment, markets have witnessed a 30 year secular decline in bond market yields. Serious market turbulence might result, significantly greater than that associated with the February 1994 “surprise” rise in rates initiating a tightening cycle, were the market to believe it were embarking on a steady (or rocky) rise in rates from near zero to a “neutral” fed funds rate of 400 bps and a “normal’ 5 percent yield on 2-year U.S. Treasuries. The recent TBAC’s proposal for floating rate notes (FRNs) seems an obvious option to cushion the transition for the market. As an indication that the eventual unwinding and normalization of the yield curve will take time and inflict pain on holders of fixed income debt, the market appears already to be requesting such “puts”.[/i]

    Want to be maxed out on debt in Vancouver? To which the bulls reply will be. Hey im Ok ive fixed for 5 years.
    Some of them are intellectual giants aren’t they!

    What about those on variables or those coming to the end of their fixed term right now. Those are the people will be forced to sell, and the prices will have well and truly plunged by the time they get around to it refixing in the furture – and margin calls maybe made on that loan.

    Quite possibly this is your bubble popping black swan right here.

    • Yup, that was an interesting article, Taipan. You can easily see how problematic it is to raise rates now without throwing the yield curve in a direction you just don’t want to go. And yet there is a lot of precedence for rates to rise.

      Over at Crestmont Research they had come up with what they call the 6/50 rule which gives us an indication of the historical interest rate activity. The lead in to it reads thus:

      “In the past 40 years (with a two-month exception in early 1998, one week in April 2006, and Sept to Nov 2006), there has not been a 6-month period during which interest rates did not change at least 50 basis points-interest rates are much more volatile than most investors realize. As history demonstrates, almost half of the time, interest rates change by more than 1.5% over all 6-month periods.”

      Which is pretty interesting stuff. Especially as we know rates won’t fall further so at least we know the direction we are headed. The introduction of Floating Rate Notes does suggest the thin edge of the wedge to me. Rates are about to move which will come as a shock to….. well, pretty much everyone.

    • when UST yields turn up, it will mean the fed has lost control of the bond market. this will have some interesting psychological consequences. for a preview look at europe – italy/spain yield spiking again only a few months post-ltro.

  7. Just finished watching the documentary “Chasing Madoff”, so many parallels with Vancouver RE, incredible. Harry Markopolos is an incredible figure, he dedicate so many years of his life and still was unable to get the SEC or the MSM to expose Madoff.

  8. Some people even say crazy things like “Buyers aren’t in a rush because rates aren’t going up soon.” Does that mean that they *would* be buying if their forecast was an imminent rate increase? How do you trade rationally alongside such thinkers?

    • A strange game.
      The only winning move is
      not to play.

    • Interest Rates

      Buyers won’t be buying if interest rates were going to increase because then prices will go DOWN. Yeah, you lock in your low rate but pretty soon you’ll be in negative equity. Lose-lose proposition.

      • What we have been seeing these past two years is that every time the threat of interest rates appeared or major changes to borrowing requirements were introduced there was a rush of buyers trying to get in before the gate closed. Too few people seem to understand that rising rates typically drive down asset prices so there really is no hurry necessary. As rates go up, home prices will drop…typically in a larger propertion to the relative increase. This is because higher rates drive buyers out of the market (only partly due to affordability) and a lag time develops while vendors assess the new sales environment and eventually lower prices. All of this process takes a long time to work through the system as you can imagine. Unless there is an actual crisis, it can take years for sellers to actually capitulate to market dynamics. As we are seeing in the US, this is only happening now despite the record level of foreclosures. So be prepared for a long slow melt in pricing. It may even seem glacial if you are impatient but the trend is most certainly down for many years to come. This is the season of renting and saving.

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