Wake Me Up At 50%-Off – “Buyer’s market, home prices fall? When homes go up a million % and then come down 3.8%…that’s not much of a bargain.”

“Vancouver home sales and prices were lower last month as Canada’s third-largest city continued its role as one the nation’s hardest-hit centres in an ongoing housing market slump.” …
“While Canada’s market continues to look balanced overall, there are clear pockets of strength and weakness,” BMO Capital economist Robert Kavcic observes in his analysis of the CREA results. The BMO report described Vancouver, Victoria, Regina and Saskatoon as buyers’ markets — where supply markedly outstrips demand and dampens asking prices.”

‘Vancouver a buyer’s market as home sales, prices fall’, The Province, 16 Nov 2012

“Buyers market, home prices fall? When homes go up a million % and then come down 3.8%…that’s not much of a bargain.”
‘Tom Anderson’, commenting below The Province article, 16 Nov 2012

We’re with Tom on this one.
These ‘Buyer’s market’ cries are recurrent, closely akin to premature bottom calling but not quite the same thing.
Similarly, charts showing a ‘Buyer’s market’ when inventory rises against sales are misdirected and mislabelled (see example below). ‘Months of Inventory’ (MOI) and the ‘Ratio of Sales to Active Listings’ are ways of expressing inventory in terms of sales. High inventory and relatively weak sales are indicators of likely future price direction, but such circumstances don’t say anything about how market prices compared to fundamental value. MOI can “go to the wall” for a long period before a market bottoms. Years, actually.
To clarify: A true ‘Buyer’s market’ emerges when a buyer gets good, or at the very least reasonable, value for his or her money.
– vreaa


– Inventory:Sales Ratio Abuse, as evidenced in this chart from Fraser Valley RE Board data, posted by local realtor ‘silverman’ at RE Talks, 3 Oct 2012

Expect to see the term ‘Buyer’s market’ a lot in coming years:

‘It’s a buyer’s market for greater Vancouver’, The Province, 2 Oct 2012

‘Vancouver sales hit 10-year low, real estate board declares a buyer’s market’, The Vancouver Sun, 4 July 2012

47 responses to “Wake Me Up At 50%-Off – “Buyer’s market, home prices fall? When homes go up a million % and then come down 3.8%…that’s not much of a bargain.”

  1. Yes. MOI is negatively correlated to the derivative of prices. In other words if prices are going to fall for a prolonged period MOI is going to be high for a prolonged period. That has two significant implications (beyond falling prices):
    1) Sales will be low. People who depend upon sales volumes for their livelihoods will see their incomes drop for a prolonged period.
    2) It will take longer to sell. Owners contemplating, or being forced into, moving are going to find the market less liquid than before. That will mean that many will not be able do sell without large discounts.

    And even worse — and not well understood in Canada — reduced equity will further impair sales. Right now Vancouver is at a stage where sales are slow and prices weak. Imagine if prices drop 10% from here, putting prices at between 2008 and 2006 prices depending upon the region and type of dwelling. That cuts out at least the past 5 years of purchasers from buying more expensive properties, at least not without significant discounts.

  2. Calling this a buyer’s market is not bottom calling. It’s orwellian psychology.

    I agree with Tom Anderson’s comment.

  3. Prices are already pushing 20-30% off assessed in west side vancouver for SFH. Funny how the media aren’t reporting any of this. But when prices were hot the media were gloating over how everybody wants to live here, etc

  4. Speaking of BuyersMarkets… word on the street has it that Long&McQuade’s selection of quality, used musical instruments is burgeoning daily… Accordingly, here’s your Quote O’TheDay, DearReaders…

    “Whether there is any public outcry will be interesting to observe.” – Matthew Baird, MusicFest Vancouver Former Artistic Director

    [G&M] – MusicFest Vancouver Ceases Operations

    …”Katharine Carol, artistic and executive director of the Vancouver International Children’s Festival, which shares office space with MusicFest, says staff for MusicFest are no longer coming to the office, but the space has not been cleared of their belongings.

    “It’s horrifying,” she said. “They’ve been fantastic partners for us in terms of sharing space and sharing resources … and I think it’s just a wonderful festival, so I hope they have an opportunity to try to work out a way to keep it going.”

    For the last 12 years, MusicFest Vancouver has presented an ambitious program of classical, jazz and world music at various venues in August. Artists who have performed at the festival include Ute Lemper, Bobby McFerrin and Sarah McLachlan.

    “Unfortunately, the issue of money owed to creditors is likely to eclipse the accomplishments of 12 years of wonderful programming,” wrote Mr. Baird, who joined the festival this year.”…

    http://tinyurl.com/ctfhtpe

    • Real Estate Tsunami

      Are you saying that the Vancouver RE is facing the music?!

    • As long as the Children’s festival continues.

    • Real Estate Tsunami

      Ars longs, Vita brevis.
      With so many Euro-centric arts festivities vanishing in Vancouver, the city’s soul is slowly bleeding to death.
      I guess, one should take solace in that they are replaced by Asian-centric ones.

      • Real Estate Tsunami

        Ars longa, of course.,

      • “Will there be adjustments? Absolutely. There has to be.” – Willi Jahnke, President iRock Entertainment

        [PWN] – Rock the Peach hits sour note

        …”Attendance at the inaugural Rock the Peach music festival was barely a third of what organizers expected and some suppliers have been left holding the bag as a result. Six creditors are owed a total of about $100,000 and have been asked for a 90-day grace period on payment after some of their cheques bounced, confirmed promoter Willi Jahnke… …Jahnke also produced through a different company the Nakusp Music Fest, which ended an eight-year run with its last show in 2011.”

        http://tinyurl.com/chh2ctk

  5. “A true ‘Buyer’s market’ emerges when a buyer gets good, or at the very least reasonable, value for his or her money.”
    Exactly, as long as it makes more $en$e to rent it’s not a buyers market.

    • Real Estate Tsunami

      The graph looks realistic.
      In 2001, I advised a young friend of mine to stop renting and buy.
      However, now the advise would be the opposite.

  6. As far as I’m concerned it’s a buyers market. You can’t know when the exact best time to buy or sell is until after the fact (market has already bottomed or peaked).

    In my mind if you are looking to buy and have loads of selection and can drive a hard bargin on price, you are in the advantage and therefor it’s a buyers market. At the same time if you are selling and can throw your place on the market and see 15 offers by the end of the week, it’s a sellers market even if prices are still quite low.

    Buyers/sellers market has nothing to do with the value you are getting, it has everything to do with how easily you can buy or sell a home.

    That being said I’m not rushing out to buy right now, but buyers clearly have the advantage right now.

    • Davers: Buyers have the advantage? Really? Seriously? When you still can’t find *one* SFH in all of Richmond, no matter how horrific, under a half million dollars? When dark, dank teardowns on the west side of YVR are *still* upwards of a million or two? When every indication points to a full-on crash that’s only just begun? When BPOE’ers are so broke there’s a two-hour border lineup virtually every morning just to temporarily escape the insanity?

      “Idiot buyers market” maybe.

    • I agree with Gord.

      davers, thanks for the comment, but I’d respectfully ask you to reconsider.
      You say “Buyers/sellers market has nothing to do with the value you are getting, it has everything to do with how easily you can buy or sell a home.”
      Think about it: you can always buy a home ‘easily’ if you throw enough money at the market, and similarly you can always sell a home ‘easily’ if you drop the price enough. ‘Ease’ of performing the transaction is thus always available. But we’re not interested in ‘ease’ of performing the transaction (that ‘ease’, after all, disappears in an instant), we’re interested in value.

      • I think we just disagree on the definition here. I completly agree that there is still no value to be had in this market (I just signed a 1 year lease on my rental).

        However, the potential sellers are now ripping their hair out because the guy down the street just dropped his price by 10%. Buyers can take their sweet time looking at all of the options available and put in lowball offers (relative to asking/assessed prices) and not feel any pressure to make a move before prices skyrocket further or all the homes they like are taken off the market.

        A year or two ago buyers would put in a bid 5% over asking and still have to worry about some other buyer coming in at 8% over asking. In the meantime three other properties they liked were sold and now there are comparable ones on the market for 10% more.

        The panic was completly on the buyers and now it is entirely on the sellers. Sure a seller could drop their price by 50% right now and get a sale in a week, (well, actually there are a couple on the Weekly Drop that are 50% off original asking price with no sale in sight), and a buyer could offer 30% above asking in a hot market, but those are acts of sheer desperation.

        Given the choice of being a buyer or a seller right now, I’d be a buyer. Of course, I am also waiting for value, so I’m neither at the moment.

      • I guess another way to put it is that it’s all about urgency for me.

        “Sell now or be under water by next year” is the new “Buy now or be priced out forever”.

      • davers: Yes, you could argue that this is a matter of semantics. But we think it’s more than this. The term being bandied about by those with an interest in the bullish case is ‘buyer’s market’. The implication of that term is that it’s now good for buyers, and the further implication is that prospective buyers should thus move along and buy. But this is wrong. It is not a good time to buy; it is still a very, very poor time to buy; even though prices are down a tad, just a smidge, they are still far, far above values determined by fundamental measures. Still two to three times higher, in fact. Thus the term ‘buyer’s market’ is being used as propaganda, as deceit, as an advertising mechanism.
        So, sure, define the term however you like and then say this is a ‘buyer’s market’… but why do that? Why not rather refer to it as a ‘slow’ market? Isn’t that a better term? It still embraces the lack of urgency, but doesn’t confuse the innocent.
        I prefer to keep ‘Buyer’s market’ for a time when it is good for buyers to buy; when there is good value available in the market.

      • I think you are over-estimating the effect of what the RE boards call the market. They held off for months on calling it a buyers market when prices were falling, instead opting for the term ‘balanced’.

        It’s been a ‘sellers’ market for the vast majority of the past 10 years and this did nothing to stop buyers from bending over backwards to pay above and beyond whatever crazy price the sellers were asking.

        Save for the mini crash of 08-09 this is the best position buyers have been in for the past 5 years. Gone are the days where buyers would borrow money from relatives to get that extra $30K and beat out other buyers. Instead now buyers will negotiate a lower price to meet their price range.

        Buyers will still over extend themselves and lots of todays buyers will be in signifigant financial trouble in the coming years, but a key element of buyers over extending themselves is now gone: panic. Buyers are far more likely now to take a step back consider their options and perhaps decide now is not the best time to buy. During the boom there was no time for that, offers had to happen at the drop of a hat with minimal consideration.

        We both agree now is a poor time to buy in terms of value, but I guess we just disagree on the meaning of the term ‘buyers market’. Whenever I talk to people about it being a buyers market, their response is not that we all need to rush out and buy now, instead they feel now is a great time to wait on the sidelines and see how this plays out.

      • Ralph Cramdown

        I don’t see anything wrong with using the term “buyer’s market” to describe a situation with a lot of product and negotiating room.

        It has certainly gotten worse in other places at other times — perfectly good houses would be listed at below replacement cost (i.e. less than the cost to build, with the land for free) and would STILL languish for months or years. People would have to beg agents to take listings, because agents just didn’t want any more. Realtor.com is showing 99 listings for SFH with at least 2 bedrooms in Detroit for less that $1,000.

        Look at cars for another example. While it may never be a good time to buy a Chrysler product, there’s certain times of the year and month that are better than others.

  7. “Buyer’s market.” Just more bullsh*t real estate industry jargon that the bought-and-paid-for mainsteam media whips out to describe anything that isn’t full-on mania.

  8. im goign to agree with davers here… i dont mind calling it a buyers market if the buyer can negoitate prices quite a bit below ask..and its a sellers market if the seller can get offers above ask… but the term as such doesnt imply value though it might be used to provide an illusion of value.

  9. Buyer’s market? Seller’s market? I’d rather call it the Flea Market.

    You have vendors selling old moldy crap and very unlikely to sell at asking price and for sure there will be no bidding war.

    A little or a lot of haggling takes place before a sale completes. The seller unloads their crap and buyer who thought he did a great haggling job ended up with some moldy crap.

    Wake me up when this is not the flea market and the Holt Refrew is having a liquidation sale.

  10. Even at 50% off peak, prices are still ridiculous

    My parents Killarney 44 lot was probably worth about 1.3M at peak. At 50% off, that’s still 650K! Are people so sensitized to prices that they are forgetting this is still over 1/2 a million dollars? If interest rates were to go to historical norms, nobody would be able to afford this, save the 1%.

    • 4SlicesofCheese

      Yet no one can see this 🙂

    • Few could afford it even with rates staying low. Something to do with “equity”. 🙂

    • Completely agree Brian, great example.

      Even with a 20% down payment (because who doesn’t have $130g’s lying around) it’s still a $520,000 mortgage!! So at least $3000g’s (at current rates) a month plus taxes, utilities, and repairs….not to mention opportunity costs on the not so tiny down payment.

      Wow, makes one think about how crazy things really are out there!

  11. Real Estate Tsunami

    I call it a “buyers beware” market.

    • 4SlicesofCheese

      I call it “buyers remorse” market.

    • Naked Official #6000

      I call it a “cornhole-the-buyer’s-market”

      • “You cannot escape the almighty BungHole!”

        [NoteToEd: In 1969 me MammyN’Pappy paid all of CDN21K for a spacious 3BR 1BA BurnaBonian Rancher on an OverSize CornerLot within Spittin’ O’TheInstitute. BullDozed in the 90’s. Natch. In late ’88 I recall dropping CDN85K on a similar abode in the RockO’White – its fate is unknown.]

      • Naked Official #9000

        Nem, you may not be surprised to hear that I have every episode of Beavis and Butthead – the best cornholio was “Bungholio – Lord of the Harvest” check it out, it’s better than an east van crack shack.

  12. I can smell more cheap acreage just over the horizon, yep, some places are already there and others are falling rapidly.

    If anyone wants a SHTF property outside of the city, try a lowball bid. It’s amazing how many properties have been sitting for 2+ yrs with no movement and people are starting to ‘need’ to sell.

  13. Too bad I can’t move to the USA! 30 year mortgages and affordable home

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