As the summer creeps into it's second half, you can smell the season starting to turn. The air has a cooler edge to it and my yard fills with the early leaves that are starting to fall.
In Real Estate, the malaise of June/July continues.
Early statistics suggest that we could be on track for 2nd worst August for sales since 2000. 2008 would be the one year which could be worse that this. It seems listings are trending higher which, as the esteemed VHB notes on one blog, is rare as August listings have only been higher than July’s twice in the last 10 years.
Another interesting tidbit I came across. Apparently, the average person in BC makes almost $10,000 more than he/she did in 2001. But the average house costs $450,000 more than it did in 2001.
This is a stunning 45x the rate of income growth.
How could the market start to falter?
But sales are occurring.
A co-worker has sold his condo this month. And his story is telling.
Adament that he would not accept less than $800,000 for the condo he paid $300,000 for 10 years ago, he was prepared to rent it out rather than go below this artificial threshold.
After negotiating over an original offer of $760,000, a Hong Kong buyer finally closed on the sale.
It's interesting because it is tangible evidence that there is Asian money is still at play in this market. The HK buyers were keen to be set up in Vancouver before school starts in September, so pressure was applied to the real estate agents (on both sides) to cut their commissions in half.
End result was that my co-worker got is plus-$800,000 price, the HK couple got their price; and the R/E agents took a big haircut on their commissions to make the deal happen.
It will be interesting to see how many other sellers are prepared to follow a similar path: wanting to sell but defiant that they will not cut their asking price.
How many will follow through on their threat and pull their listing in favour of renting?
In this particular case, pulling the listing and renting wouldn't have been a problem because the mortgage owing is low enought to allow rent at market rates.
It will be interesting to see how many sellers actually go this route.
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Email: village_whisperer@live.ca
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"This is a stunning 45x the rate of income growth."
ReplyDeleteUm, no. For this to be true, the average income and average house price in 2001 would have to be the same dollar figure. I don't think houses were ever THAT cheap.
You can't compare the rates of growth without referencing the base values of both incomes and house prices in 2001.
I moved from Vancouver to the US for a job 10 years ago and experienced the run up and run down. In my experience it took a lot of sellers about two years to reset expectations and accept lower prices. All the while prices trudged down. Where I live about 10% a year -- never an outright collapse but years of slow melt. What got me was the disbelief and denial people had of the situation. Now when I travel back to canada it's like a time warp to 2005 America, and I fully believe the reckoning is coming and prices will revert to sustainable levels as it did in a very similar society to the south.
ReplyDeleteWhen China crashes, easy money from China and HK will dry up.
ReplyDelete2 issues:
ReplyDelete1) You can't compare an *annual* income to a house price that gets paid over 25+ years
2) You can't compare increases in income to increases in house prices unless you use percentages (i.e. incomes are 10% higher, house prices are 50% higher)
The comparison in this post is like saying, "the price of a nuclear power plant went up $1B in the last 10 years, which is 100,000x faster growth than the $10,000 rise in income".
This seller will now think they are a R/E expert and genius for pulling off what amounts to a lucky break. If they tried this next month it would fall flat.
ReplyDeleteI am the seller and I definetily don't think I am a R/E expert and YES very lucky. Listing at the time we did was marketing to HK buyers who come in July to do just that, settle the family for September schooling. We had the right product listed and the right buyer walked in.
ReplyDeleteI have a hard time believing this little anectode anyways because with the amount of unsold inventory available, if someone is stuck on their asking price the buyer can just move onto the next unit. Why would someone dick around like this with an intransigent seller?
ReplyDelete