Thursday, July 5, 2012

Thurs Post #2: In Vancouver, "something has affected the psychology"

News media stories on the abysmal June 2012 real estate sales data continue.

The Globe and Mail is out with an article titled, "In Vancouver, the seller's market recedes."

The Globe tells us that prices in Vancouver, the country’s most-expensive real estate market, remain stable... but activity has dropped sharply. They also note that economists welcome the decline in sales as an early sign that a correction is taking root, and said prices are likely to follow suit.

But what caught your faithful scribes eye, was an examination of the public's current mindset.
While there is anecdotal evidence that foreign investors are losing their appetite for real estate in the Vancouver, experts remain perplexed as to exactly why the city is seeing such a decline in transactions right now.

Toronto-Dominion Bank deputy chief economist Derek Burleton, who is calling for price declines of at least 15 per cent in both Vancouver and Toronto... (says) Vancouver’s slowdown is “striking, because nothing has really fundamentally changed in the market. It’s hard to pinpoint. Something has affected the psychology."
You don't think that 'psychology' might be the fact that people are beginning to understand that we are in a real estate bubble, after all?

Perhaps this explains another element of our current market which is confounding the 'experts.'

Eugene Klein, president of Real Estate Board of Greater Vancouver (REBGV), is perplexed in the days leading up to the changes in the the maximum length of insured mortgages from 30 years to 25.

The Globe notes Mr. Klein said he expected to see indications of a rush in activity prior to the changes taking effect, but hasn’t seen any so far.
“We thought that people would see a fervour of activity from people trying to get in under the line of the due date, but members haven’t been telling us that that’s the case. So we don’t know if the information is really out there, if consumers really understand it.”
Perhaps the problem is that they do understand it all too well.

Now who do you suppose might be responsible for that? Perhaps Bob Rennie has an opinion.


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  1. There is nothing perplexing about this at all. Everyone that could have gotten in the market is in, either purchasing their first, second.... eleventh home/property. The number of new buyers were few a few weeks ago, and now even less with the changes. It's tapped out. This exact thing happened in the US.

    Let's be clear. The US housing correction didn't start directly because of bad lending, or credit default swaps or Lehman, it began going down far in advance of that. The US housing market went down because there were no buyers for an enormous supply. Everyone who was capable of getting in were in. It was a race to the top for the developers. Just like it is/was here. After that trigger things got worse in the US as people started becoming underwater and unable to unload properties. The same will happen here.

    1. well said. Good counter-argument to the locals who think Vancouver RE won't drop because it doesn't have "X" as they did in the US, where X is any of the subprime, zero-down, non-recourse mortgage, "bad lending, or credit default swaps or Lehman"