Monday, July 19, 2010

Is the price collapse on Vancouver's west side accelerating?

More evidence that reality is somewhat divergent from the R/E 'spin'.

Faithful readers will recall that last month the R/E propaganda machine was attempting to calm jitters about a significant real estate turnaround.

You can't hide declining sales numbers, but panicking sellers were 'soothed' with news that 'Hot Asian Money' (HAM) was maintaining property values, particularly on the west side of the City of Vancouver.

Headlining this message on June 12th was our buddy Cameron Muir from the BC Real Estate Association who specifically talked about 'HAM' maintaining west side market values:

Perhaps this reassurance would calm nervous buyers and keep them dashing into the market, a move which would support market prices?

Well, as we already know, the Real Estate Board of Greater Vancouver (REBGV) statistics for the month of June 2010 came out and the numbers didn't reflect Muir's appraisal of the situation..

On the west side of Vancouver, where all the supposed 'HAM' money was supporting real estate values, the benchmark price for detached homes dropped a significant $91,000 from May to June.

And now... in the middle of July... it appears the downward slide continues.

As noted on VREAA the above pictured house at 3540 West 40th Avenue provides a snapshot of what could be an accelerating collapse.

Promoted as an outstanding Dunbar character home in immaculate, move-in condition, this 3,359 square foot 4 bedroom, 2 bathroom home sits on a 6,700 square foot lot.

It was touted as having been maintained in pristine condition with a high basement ceiling and large unfinished area with great suite potential if needed. The home was originally listed for sale at $1.549,000 on June 7th, 2010.

Hot Asian Money didn't exactly rush in to trigger a bidding war.

Instead what we witnessed was something more akin to a seller desperate to move the property.

On June 12th, 2010 the asking price was reduced to $1.449,000 - a reduction of $100,000 in the blink of an eye 5 days after the property was originally listed!

And with no one jumping in on that, the seller obviously received an offer from a buyer sensing the desperation.

On July 6th, 2010 the home sold for $1,340,000, yet another $109,000 shaved off the latest asking price.

That's a total drop of $209,000 (or 13.5%) off the original asking price... a far cry from several months ago when bidding wars were triggering sales in a day after listing at well over asking pricse.

More significant in all of this are the background details of this sale.

This home had been held by the owner for over 40 years. At first blush you would conclude that the sale is no big deal because the owner could obviously come down significantly from their asking price and still make a huge profit.

Which is true. And that is very telling.

As we have talked about before, a chilling dynamic will be hitting real estate in Canada over the next 15 years.

The first wave of Boomers are hitting retirement age this year. Statistics show that over 70% of these Boomers do not have adequate funds set aside for retirement. Their whole retirement 'plan' lies in selling their home, downsizing, and using the left over money for their retirement years.

In this cases, holding out for 10 or 15 months to get that optimal 'asking price' is probably not an option... especially if fears of a declining market start to grip the general public.

I suspect you will start to see more of this; long-time west side owners listing their homes and then quickly and dramatically slashing their asking price in order to realize the sale.

The chilling fact is that anyone who bought in this area in March/April (at the top of the market) is suddenly $210,000 underwater from their purchase price. And if the benchmark price continues to plunge, other Boomers will fall over themselves as they drop their asking prices in a desperate attempt to close that sale. Remember, even at 50% off current asking prices, any real estate sale represents a stunning profit over what these owners paid 40 years ago. And as momentum builds, latter Boomers will be frantic to salvage what they can from their retirement 'plan'.

Fear.

For Boomers who have all their retirement plans wrapped up in the value of their house, it will become 'the' most significant motivating factor.

This particular home owner shaved almost 14% off their asking price when the home was only on the market for 1 month. Imagine what a wave of Boomers will do if their homes languish on the market for almost a year?

We will watch the next 12 months with keen interest.

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Email: village_whisperer@live.ca

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9 comments:

  1. Horse cocks did I pay too much for my 500 square foot condo in Yaltown at $499,000 ?

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  2. What asshole wrote this ?

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  3. This is a very distorted piece of crap which only value is to show what ignorance and idiocy we can find on the web.
    Should the writer of the post had done his homework he would have noticed that asking $1,549,000 for a house that age (40 years old!)was a mistake from the seller's side, and that the purchase price was actually a good deal for a house that old.
    Sure, the owner was greedy for asking over $1,540,000, and I'm sure the realtor was wise enough to let him put the price, a lot of people think their property's value is high, mainly for sentimental reasons, but the market will show them otherwise, however, to say this sale shows a market collapse is plain stupid.
    The property's value is mainly on the land, perhaps the writer of the blog will get out of his bedroom next time he tries to write anything.

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  4. "In this cases, holding out for 10 or 15 months to get that optimal 'asking price' is probably not an option... especially if fears of a declining market start to grip the general public.

    I suspect you will start to see more of this; long-time west side owners listing their homes and then quickly and dramatically slashing their asking price in order to realize the sale."

    . . . hello?! the house was ONE month on the market, not 10 or 15, I-D-I-O-T ! ! !
    and no, people are NOT suddenly $210,000 less than March/April, this house was listed way higher than the fair market value, but you will never know that. As the comment above, get out of your room and do research before writting anything.

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  5. the previous anonymous comments are probably from a realtor or a fool that bought real estate at peak prices....
    every non-biased group is saying that canada is in a real estate bubble and that prices are AT LEAST 20-30 percent overvalued.......
    wonder how many realtors will leave the profession over the next 2-5 years as property prices crash

    only a fool would buy in 2010

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  6. Well it can only keep going up and up, be quick, jump in now or you will miss the boat forever. Do it NOW.

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  7. 2010 will be a strong year for Canadian real estate:

    http://www.youtube.com/watch?v=bN1EoK4YtYM

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  8. strong year for real estate???
    LOL
    have you seen the 30 - 50 percent price drops in the okanagan??!!!!!

    fools.........

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