Thursday, July 19, 2012

BC Business Magazine says "Real Estate Mania Is Ending", but a long hot summer remains before it does.

BC Business Magazine is out this week with an article that headlines: "Real Estate Mania Is Ending"

Seems everywhere you turn these days the message is being hammered home via the mainstream media.

The article starts off with a succinct observation.
History shows that Vancouver has always been a real estate boom-and-bust city. Now that the most recent mania appears to be over, with sales falling and prices threatening to follow, there's no reason to think that's going to change.

But if there is one thing we know for sure, few in the Village on the Edge of the Rainforest are students of history.  If they were, we wouldn't be in this situation right now.

BC Business makes another observation...
Fear and worry are rampant in Vancouver these days: the mighty real estate market is struggling. Whether it is in a tailspin or due for a monstrous crash is the subject of endless dinner conversations, office cooler chats and online messages.
Ahh yes, that is certainly the topic of conversation these days in a City where real estate is almost sport.

But are 'fear and worry' rampant yet?

The answer, at least in this blog's opinion is 'no'.  Certainly not on a level that's possible come the Fall.

BC Business Magazine ultimately dismisses what we believe is coming:
Was this a massive bubble? Slightly. When prices rise that much, we’re nudging bubble territory. But bubbles imply resulting crashes, and I don’t believe we’re going to have one. Of course, prices will drop a bit, but an American-style catastrophe isn’t going to happen.
There's a moral here.

The doubters will only believe it's a bubble if we have a resulting crash. And no manner of charts, theories, or tales of congruent circumstances (leading to this very outcome in other countries) will convince doubters until they see prices fall here - significantly.

Summer will probably not provide either side any answers.

Typically we see listings pulled in the summer as vacations take priority.  Meanwhile current sales are boosted by the rush to beat the new mortgage rules deadline. A curiously large number of recent reported sales are still pre-July 9th.

New listings have fallen sharply in last 10 days. The 7-day MA on Juy 9th was 284. Today 225. No sign of panic among sellers.
Market observers are speculating that we are in a standoff between buyers and sellers.  A sentiment echoed by realtor Larry Yatkowsky who asked yesterday, "Are Vancouver home buyers and sellers stubborn?"

The answer is 'Yes'.

Buyers are having their beliefs about a collapsing market reinforced daily. Sellers are adamant that they will not accept less than what they believe their properties are 'worth'.

It's all shaping up to be a long summer for both sides.

Will there be an event that triggers panic for either sellers or buyers in the Fall?

Finance Minister Flaherty and Bank of Governor Carney came back from the G-20 concerned enough to reiterate their warnings to Canadians.

Should you put any worth in their admonishments?

We shall see.

Unlike BC Business Magazine, we believe a catastrophe will happen here.

And then it will be clear to all and sundry that not only are we in a bubble... but we will be ground zero for a collapse unlike anything any of us have ever seen.

That's when 'fear and worry' truly will be rampant.


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  1. If prices are already down 15% and heading lower as the Van. Price Drop notes, then the crash will truly be historic. This is still the Pre-season, the real fun will begin when the hockey season starts, and most people will concede that it's game over by the time it ends in 2013. I saw the other day on VPD a house in my old neighborhood of South Surrey drop from over a million to under 800K. The real value of that house is 300K - I wouldn't be at all surprised to see it go down to that or lower by 2015. I may never buy again! Having been a renter for 4 years since since I moved to Ontario, I have discovered the benefits of renting, which are too many to be named here. I may have become a lifelong renter, why be tied down to any place especially if the kids are grown and flown the coop? Unless I buy a piece of land and put a trailer home on it to live there 6 months or so, and rent down south for 6. Much better quality of life, by the time this is over, there may be armies of born again renters in Canada!

    1. I am betting that the average price of a single family home will fall below a million before the month is out. The price drops have been very rapid. Anyone who bought with 5% down in the last 9 months is already underwater and that means trouble is here. It is so interesting how rare a person it is who can actualy see what is taking place. This current situation though is rife with hazard for debtors and some will be trapped for many years to come if they do not have a means to get out.

  2. I have truly discovered Freedom 55, I have seen the future, and it is called RENTING..

  3. I have my popcorn ready. Hope its not a long wait to see the Zeppelin burn.

    1. I don't get the whole popcorn analogy. This bubble makes me sick. I have stocked up on barf bags instead.

    2. Some will find smug satisfaction in watching events play out as predicted after having so many dismiss them for so long.

      The reality is the impact will affect all of is in profound ways that many of us still do not fully understand.

      Everyone will be hurt by what's coming, even those wise enough to have prepared/protected ourselves.