Mon Post #3: Newsflash... it's "a stagnating housing market and in Vancouver prices are already falling from sky high levels a year ago"

On Sunday we told you that it's not the news per se that's important... it's how you spin it.

The GVREB had been hard at work MOPE'ing the news (Management of Perspective Economics) and had downplayed the third worst February in real estate sales on record (a decline of -17.8% from February of 2011) into a "pre-spring hike" in sales.

This was achieved when the GVREB compared those very same abysmal February 2012 numbers to that of the absolutely horrendous January 2012 numbers... instead of comparing them to the results of February 2011.

As a result February's abysmal numbers were promoted as being 61.4% higher than the horrid January numbers... thus a "pre-spring hike".

So how embarrassing is it for the GVREB, after heralding an awesome February in real estate sales, to open up today's edition of Canadian Business Magazine?

Generally the article painted a rosy outlook for Canadian Real Estate nationally by the CREA...

"Risks to the Canadian economic outlook remain elevated owing to the European sovereign debt quagmire, but the continuation of low interest rates is the silver lining. So long as the European debt crisis is contained and a global economic recession avoided, low interest rates will support Canadian home sales and prices - CREA chief economist Gregory Klump"

But buried in the article were a couple of real gems.

First off our old friend, CIBC economist Benjamin Tal, tells us the new CREA forecast is "if anything a best case scenario forecast."

Ouch!

Then Tal goes on to say his bias leans more "toward an expectation of more significant price declines."

Oh really?

Tal expects further price declines and that these declines will MORE SIGNIFICANT than what we have already seen?

Pass the popcorn and tell us more!

"This is basically a stagnating housing market," Tal said. "This is not a housing market that is going to be on fire. This is a housing market that you'll see activity moderating and prices actually going down."

Seems Benny is reading from a different script than the GVREB this month. What about Vancouver?

"In Vancouver, prices are already falling from sky high levels a year ago, especially in the once bustling condominium market."

Now I ask you... when you read the GVREB's take on February's numbers, did you come away with the message that Vancouver's prices are already falling from sky high levels a year ago? Or that more, significant price declines are in our future?

Hmmm... didn't think so.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Mon Post #2: The shifting sands in China spells bad news for those in real estate relying on HAM

One of the arguments you hear from locals who dismiss concerns that our real estate prices have surpassed what local incomes can support is that Vancouver is in high demand and endless streams of wealthy Asian investors will buy what locals cannot afford to purchase.

As we have noted here before, China's history is replete with boom and bust cycles. In addition, the policies of the US Federal Reserve have been exporting inflation to the far east.  At some point China is going to react and begin focusing their economy inward.

Few people believe this is going to happen. Fewer still fully understand the repercussions this will have on the world economy.

Evidence that this trend is starting in earnest comes today from Reuters who report that Chinese Premier Wen Jiabao has cut his nation's 2012 growth target to an eight-year low of 7.5%. Wen Jiabo has made boosting consumer demand the year's first priority as Beijing looks to wean the economy off its reliance on external demand and foreign capital.

"We will improve policies that encourage consumption," Wen told nearly 3,000 delegates of the Communist Party-controlled legislature.

China has vowed to wean the economy off dependence on exports, smoke-stack industries and government-backed infrastructure, and promote balanced growth that will elevate the incomes and spending of farmers and workers.

The lower growth numbers just reflect the reality that growth is going to be slower because the rest of the world is going to be weaker. China is in for some rough times ahead. And rough times means less money for entrepreneurs to spend overseas.

China could be headed for its slowest full-year of growth in the last ten years. The economy ended 2011 with its slackest quarter of growth in 2-1/2-years at 8.9% as it felt the chill of the euro area debt crisis and a sluggish U.S. economy.

The outlook for the real economy remains cloudy, according to the latest surveys of China's vast factory sector and the burgeoning services industries that are key to rebalancing growth and generating more stable domestic-driven demand.

The Premier also pledged to curb speculative demand in the property market. The government will continue to defuse rising local government debt, regarded by many investors as the key risk to fiscal sustainability (and the source of the liquidity for the exploding Chinese real estate market). Government figures show about 10.7 trillion yuan ($1.7 trillion) was owed by local governments at the end of 2010.

Chinese investors (who have been spending money like drunken sailors on Vancouver Real Estate) are about to experience huge cash flow issues. Somehow I suspect what money is available for investments, that money isn't going to be spent in a real estate market that EVERYONE can clearly see is overvalued and ripe for a major correction.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Mon Post #1: Like ripples from a rock cast into a still pond...

On Saturday we shared with you a blog post by well known US blogger Mike 'Mish' Shedlock as he compared the bubble in Vancouver with the bursting bubble in Ireland.

In a reflection of the power of the global village that is the internet, the story has been picked up by a number of sources including the website Business Insider.

Headlined 'See What $890,000 Buys in a Housing Bubble and After the Bubble Pops', it's further evidence that Vancouver's reputation as a city firmly ensconced in a housing bubble is now solidifying in the mindset of investors around the world.

It is only a matter of time before investors, even potential wealthy Asian HAM buyers, begin to completely shun our market. Catching such a public and well known 'falling knife' is not something savvy investors do.

You can almost hear the ticking of the housing time bomb, MOPE not withstanding.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

It's not the news per se that's important... it's how you spin it.

Managing perception.

The concept has become so crucial in modern society that managing perception has become an art form.

Commodities trader Jim Sinclair is famous for deriding all the MOPE he sees in the press today.  That's the acronym he utilizes for all official attempts to put lipstick on the pig of a declining economy: the Management of Perspective Economics (MOPE).

Blogger Charles Hugh-Smith wrote about the practice last month and noted immediately in his post why the great game of perception management is so important:

"The economy will expand if you believe it is expanding - because you'll be 'animal spirited' into buying a lot of stuff on credit that you can't afford."

Smith observes that economists speak of these magical "animal spirits" that fuel economic expansion, but that this is simply a colorful term for perception management: when people perceive others reaping outsized gains in profits or pleasure from taking risky bets and freely spending borrowed money, then they will feel an overpowering urge to follow the herd and leverage their capital (if any) and disposable income (if any) into risky bets and zealous over-consumption, i.e. "animal spirits."

Conversely, when said risky bets blow up and participants have lost their ever-loving derrieres by following the herd, then "animal spirits" quickly dissipate as the herd thunders off a cliff to its financial demise.

The task of the financial/political/media Status Quo is to convince people to overlook the abundant evidence of economic deterioration and focus on heavily juiced "evidence" of robust "growth."

The game plan is this: if the Status Quo can convince you that the economy has righted itself and from here on in everything will get better and better, every day and in every way, then we will abandon financial rationality and start buying homes we can't afford on credit, cars we can't afford on credit and boatloads of stuff from China that we don't need on credit (of course looking cool is a "need," i.e. having an iPad to carry around).

In other words, believing it is so will make it so.

Which brings us to the latest media reports of February's Real Estate results.

The Vancouver Sun headline blares, "Metro Vancouver market balanced, board says: Price for residential properties up six per cent in a year according to report"

The article regurgitates the press released cranked out by Real Estate Board of Greater Vancouver (REBGV) president Rosario Setticasi. It heralds a "pre-spring hike in sales.",

Pre-spring hike in sales?

Haven't we been hearing constantly about how real estate sales are tanking in the Lower Mainland the last 2 months? How is it that we have a "pre-spring hike in sales?"

According to the REBGV:

“With a sales-to-active-listings ratio of over 18%, we see fairly balanced conditions in our marketplace as we move into the traditionally busier spring season. Sales reached 2,545 in February, a 61.4% increase over the 1,577 sales in January.

Wow! A 61.4% INCREASE in sales!!

With a headline like that and opening statements like that, it certainly appears like the market is rip-roaring hot, right? I mean sales are up over 61.4%... holy crap!

Of course that's the perception you're supposed to gleam from glancing at the article.

Dig a little deeper and you see that those 'rip-roaring' February sales actually constitute a DECLINE of 17.8% from the 3,097 sales that were recorded in February 2011.

Which means compared to last year, February 2012 was dismal. Yes they were a huge improvement over a disastrous January 2012, but they were still atrocious.

How atrocious?

The February 2012 sales in Metro Vancouver were the third lowest February total in the region since stats began to be gathered in 2002.

But the headlines and the press statements don't shriek sales are down 17.8% from last year, do they? Nor do they proclaim that February sales were the third lowest total in the last decade.

Of course not! Instead you are fed the line that sales are UP 61.4% from last month.

Then there is the benchmark price.

Not only are such measures highly skewed in a market with low sales volumes (as several sales of high end homes completely distort the averages) but this month's benchmark price comes on the heals of the industry radically changing the way the benchmark is calculated.

With that change put in place during the middle of last month, the REBGV is happy to tell you that the the benchmark price for detached properties increased a whopping 10.5% from February 2011

But as Garth Turner noted two weeks ago, the CREA changed the way the numbers are crunched so that the public accepts a new House Price Index that now masks the evolution of a national housing decline.

Gone will be average prices, replaced by a benchmark number – expressed relative to 2005 pricing, and taking into account property differences and the social aspects of a piece of real estate.

"It’s an even better tool for local real estate boards to mask evolving market realities, hide the early signs of a correction and remove raw data from the hands of consumers. It’s bad enough that the public MLS already omits vital information, such as the number of days a house has been on the market, price changes during a listing or previous sales history. But now being given a broad, homogenized index-based McNumber for a wide area is nothing but soma for the masses."

So don't listen to all that negative press you've been deluged with the past month or so.

It's a shiny happy world out there in bubble land.  Open that wallet. Plunge yourself into debt. It's a great day to buy a house...

... all you need is the right perspective.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Sat Post #2: Another Vancouver comparison, this time with Ireland

Well know US economic blogger, Mike 'Mish' Shedlock, paused today to take another gander at Vancouver's Real Estate mania and held up a comparison to a recent sale that just completed in Ireland.

As faithful readers know, Ireland has already seen it's massive credit induced housing bubble collapse.

Prices on the Shamrock Isle continue to dramatically correct. At the height of its' bubble, Ireland was very similar to Vancouver with it's huge disconnect between fundamentals and bloated real estate prices.

With today's post, Shedlock takes a look at what $899,000 will buy you in Vancouver vs Ireland.

There is this 1 bedroom beauty at 2119 East 3rd Ave, Vancouver, MLS® Number V934050, listing Price: $899,500

Or we have this tear down at 1016 East 7th Ave, MLS® Number V930461, Listing Price: $899,000 (In Detroit you could pick up a piece of crap like this in a similar neighbourhood for $250 - $500... see yesterdays posts).

Or you could have bought this property in Donegal, Ireland for $860,000.

It's a stunning 55 room hotel sitting on 3.2 acres of land overlooking the Donegal coastline and set against spectacular scenery. The hotel sold yesterday at a cut-price property auction for the jaw dropping equivalent of $860,000 CDN.

It's truly amazing.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Sat Post #1: The higher end of the Detroit market...

Yesterday we took a look at the American housing market and how prices are so cheap that people are starting to buy in bulk.

In some places in Detroit, an entire city block of homes can be purchased for $50.  There are literally pages of homes on website available for under $500.

The immediate reaction is dismiss this because these areas aren't places you would want to live.  And as true as that may be, are the so-called 'million dollar crack shacks' we have seen profiled in areas of Vancouver places you really want to live?

Consider the other end of the spectrum in Detroit.

This 10,395 sq foot 7 bedroom, 5 bathroom mansion in prestigious Palmer Woods is described as being "a lovingly restored Baronial Tudor home boasting gigantic room sizes w/spectacular finishes T/O. Lrge walnut paneled central great hall w/frplc & art tiled flooring opens to huge living room w/carved marble frplc, dining room w/stenciled beamed ceiling & quartersawn oak lib w/frplc. Terrific bedroom suites w/art-tiled BA's & Ballroom & Billiard rms on 3rd flr. 2BR apt over garage."

Asking price is $750,000 and it has languished on the market for over half a year...

Too rich for you? How about this 4,387 sq foot 3 bedroom, 3 bathroom home also in Palmer Woods. It's promoted as a mediterranean villa boasting "exquisite art tile, elaborate woodwork & wonderful stained leaded glass. magnificient newer kitchen & master bath, originaly restored conservatory w/ fountain tranquil stone koi pond w/ fountain and gorgeous grounds."

Asking price? $445,000.

Asking a mere $275,000 (and languishing on the market) you can pick up this 2,626 sq foot Palmer Woods  3 bedroom 4 bathroom  home described as a classic all brick colonial on a quite cul-de-sac. New granite stainless kitchen, newer furnace, central air and a new roof.

Fannie Mae foreclosed on this 6 bedroom, 3 bathroom home sitting on a 22,300 square foot lot and they're hoping to get $289,900...

They aren't homes you can buy outright with one paycheque, but I think you'll agree... the disconnect is still profound.

Meanwhile... back in our neck of the woods the Financial Post commented yesterday on 'Why we're in trouble if housing craters.'

Increasingly it is becoming clear that we have not escaped the fate of the US, Spain, Italy, Ireland, the UK... and now Australia and China. We have only delayed it.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Homes for under $500? - Updated

Update: $500 homes link corrected

While we await Real Estate data for the month of February in the Village on the Edge of the Rainforest, one can't help but cast an eye to our neighbours south of the border and watch with utter amazement.

On a national scale experts predict that the bottom of the housing market collapse is still several years away, but that is not stopping buyers from plunging in oblivious to concerns they are not timing the exact bottom of the market.

And why not. In some cases prices simply can't go any lower without giving the houses away.

CNBC describes it as the greatest real estate fire sale in history, and it's not hard to understand why.

In some of the most foreclosure-ravaged parts of America, investors are buying up property and treating the housing market like it was some big box store and they are anxious shoppers wiping out whole shelves at a time.

Hedge funds and private equity shops like McKinley Capital Partners have started to quietly become landlords by buying up inventory. Joining them now are Main Street investors.

in Forest Park. Illinois, Condo units that sold for $180,000 during the boom are now going for as little as $13,500. People don't just buy one... they buy five at a time to rent out.

In California, Waypoint Homes, which has already purchased 1,000 single-family homes, got $250 million in funding in January from Menlo Park private equity firm GI Partners for more bulk buys.

The trend has accelerated as Fannie Mae releases a bulk sale of 2,500 homes. The conclusion of the robosigning scandal means bulk buying is about to undergo a quantum change. The coming auctions will not only put mammoth amounts of inventory up for bid; they will also streamline and automate current procedures.

In Charlotte, North Carolina, Cheryl and Bob Littlefield, who have five children, are already making the bulk buy work.

Two years ago they bought a lovely little house for $16,000. After putting in a few grand, they cleared $600 a month, after taxes. It went so well they bought another house. And then another. Now they own eight and are in the midst of exploring financing to do a bulk deal for several more.

Property management outfits have popped up all over the place, from the high-end down to online companies like gorenter.com, which charges as little as $25 a month.

But nothing holds up a mirror to our real estate market like what is going on in Detroit, Michigan where last year Business Insider profiled homes that you could buy for less than $500

Less than $500 each!

In fact, the 1,500 square foot home pictured above was listed for sale for only $250.

On February 12th of this year (2012), Business Insider profiled 13 Detroit homes you could buy for less than $100!

Granted, they are pretty sketchy looking homes... but when locals will drop $120 for a pair of Lululemon pants, what's $100 for a house?

In Vancouver you can't find a 1 bedroom basement suite where you could pay $500 for a month just to RENT.

The disconnect is beyond words.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.