Tuesday, September 18, 2012

And the walls, they came a tumbling down.

In our last post we brought you Richmond realtor James Wong's September Real Estate Market Report.

Wong told us that: 
The lack of buying activities and large number of listings continues to exert pressure on home sellers to cut their prices in order to sell their homes. There are many more homes listed at or below their city assessment values. Homes that were sold were ones that aggressively cut their prices, or were sold by sellers who accepted low-ball offers.
Chilling news.

And if you had any doubts about the accuracy of Wong's take on conditions, one has only to look at recent Richmond real estate transactions for confirmation.

Transactions like this one.

This is 7920 Shackleton Drive in Richmond which sold this past week (click on images to enlarge).

Billed as a 4 bedroom, 2.5 bathroom, family home, it's 2000 sq ft plus floor plan was hailed as spacious and well kept.  High vaulted ceilings in the living room,  double car garage, good sized east facing backyard and it's location close to Richmond dyke's were all contributors to a property assessment by the BC Assessment Authority as a million dollar home.

Assessed value of $1,010,000 to be exact.

And how did this million dollar home fair in a milieu Realtor James Wong described as so dire that "the only way out of this market is to cut prices… not just 5%, but with much deeper cuts of 10% to 15%?"

Exactly as he described.

Instead of asking above assessed value, the sellers recent ask price didn't even come close to assessment value.

Here you can see this single family home being flogged for $849,000:

And with that discount not working, the asking price was slashed again... this time to $799,000.

As we said, 7920 Shackleton Drive sold this past week.

We are told the final price was $765,000 (hat tip VMD and gokou3 on VCI).

From an assessed value of $1,010,000 down to $765,000.

In the words of James Wong, "A real estate down cycle is already in motion. Even a small percentage of these sellers having to slash prices to sell will result in prices cascading downward. Early sellers would consider themselves the smart ones, cashing out long before others."

That cascade has now begun.

The only question now is - how many will be smart enough to cash out before the crash begins to pick up speed in earnest?

The seller of this million dollar home might get $750,000 now... but in a few months they might well be lucky if they fetch much more than $650,000.

It's all a question of how quick sellers will stampede for the exits? For in this game... holding out might mean you might only be able to get $550,000 by next Summer.


Email: village_whisperer@live.ca
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  1. Vinyl siding and two feet of separation from the neighbouring house? I wouldn't pay more than $250k.

    1. and located on a flood plain...

    2. ...that liquificates upon shaking during an earth quake.

  2. Is that a picture of silver bars?

  3. Hallelujah! Let the trumpets sound the alarm! RE in Canada is toast as was predicted here, and by the few sane voices that were drowned out for the most part by the cacophony of insanity that has defined the market since 2000 but much more earnestly since 2009!

  4. As someone with zero money in real estate and pay check that is independent of real estate and a diversified portfolio that will weather a real estate implosion quite well, I'm just going to sit back and enjoy watching the demolition of Vancouver on-paper millionaires' "wealth."

    HAM, limited land, mild weather, mountains and oceans will not save you this time.

    I fully expect that within five years most of Vancouver, save for a few luxury enclaves, will revert to it's usual %30-%50 more expensive than the rest of Canada. And, you know what, Vancouver is awesome. I wouldn't mind spending %30 more on a house in Vancouver if it meant not having to endure -25 C weather regularly and shovelling the god damn sidewalk every morning while getting flowers in March.

    It might be different out here, but you Vancouverites are not separate from reality.

  5. Say rent is $2500-$3000, that would put this place at about $400-500K in 2012 dollars. That means from last sale price of $760K that's another -35% to go, which will be a combination of inflation and price drops.

    I'd give it another couple of years, then throw in the lowballs.

    1. I'd guess actual rent is more in the $2300-$2600 range.

  6. Hate to be a party pooper, but most people that I've heard cheerlead against real estate don't understand what an implosion of prices really means. Your favorite restaurants might close, your childrens friends are displaced, you or your friends lose your jobs in service or sales. It wont be pretty. Sure, you might get into a house cheaper, but interest rates are so low, and they are not going up, ever. Your payments will barely budge from 700k to 500k mortgage. Be careful what you wish for!

    1. The problem is/was the bubble, its implosion the solution. People are already being displaced as a result of the sky-high prices, businesses are already closing because of it. Yes, it'll be painful in the short-term, but in the long term, it'll be beneficial overall for the society.

      Greed, which killed this city, will be punished. Is that such a bad thing?

    2. Many favorite restaurants have ALREADY closed in this town.
      "interest rates are so low, and they are not going up, ever"
      - This sounds like wishful thinking. The BOC is desperate to raise rates at the first opportunity.. this likely won't happen for long time yet, but to bank on hikes not coming at all is foolhardy.

  7. @Owen,Yes but now I can finally buy me a Mcmansion for 500k.I'll probably buy a new car, go out more often. People will start to move here again and affordability will drive economy once again. Economics is a wonderful thing.

  8. I don't think you understand the damage that a dramatic, debt induced house price escalation does to the overall cost of living in a city such as Vancouver. Rents increase, food and fuel, etc. suddenly cost a lot more.

    The money problems that people with mortgages will have on the way down will be their own fault. Tons of mortgage holders took out helocs and borrowed against their temporary home equity and this will cause them problems as prices sink.

    If interest rates go higher, there will be obvious problems for mortgage holders and consequences for the economy. If interest rates remain where they are, that will be like an admission from the government that the economy is still in a state of crisis and needs emergency interest rates in an attempt to keep it from getting worse. That is also bad for house prices. By the way, interest rates will go higher, no doubt about that.

    Our country would have been much better off if this whole debt fueled house price escalation did not happen in the first place. Those that bought at the wrong time without doing the necessary research will pay the price, starting now. Think of it as survival of the fittest... now it is the renters and savers who will shine for the next generation or more. The sooner you accept this fact the better off you will be.

  9. 2:36 PM comment directed at Owen.

  10. >Your favorite restaurants might close, your >childrens friends are displaced, you or your >friends lose your jobs in service or sales.

    Hi Owen

    This applies to my neighbourhood (Van West)
    due to high RE price

  11. hey whisperer,
    love the blog man. you haven't mentioned the 20 for 20 from the mint lately and i just ordered the reindeer issue
    I know they arent worth melt value - yet, but kinda cool