Richmond: another example from ground zero for the real estate collapse in Greater Vancouver

Richmond, for those outside B.C, is a suburb community of Vancouver (and home of the Lower Mainland's largest airport).

Situated on a river delta, Richmond's geography averages just one metre above sea level. Prone to flooding, especially during high tide, the City has grown up surrounded by a system of dykes, which, although not as massive as those in the Netherlands or the levees of New Orleans, serve to protect the City from anticipated sources of flooding.

But will residents of the infamous HAM suburb soon find themselves underwater in another sense of the word?

Last Saturday we profiled yet another property in what may well become ground zero for the bubble collapse in the Lower Mainland.

The topic that day was 3900 Francis Road. Assessed at $1,020,000, the current listing price for the house is down to $799,000 - with no takers yet.

Before that we showed you 7920 Shackleton Drive. Assessed at $1,010,000, reduced several times until it reached $799,000, the house finally sold last month for $765,000.

Earlier this year, back in March, we started it all off with 6231 Gibbons Drive. Originally listed on February 28th, 2008 for $2,388,000, the property stagnated on the market until if finally lowered the asking price to $1,888,000. In March of 2012, the property sold for $1,428,000. That's $960,000 off the original asking price or 40% lower.

Yikes.

And the carnage continues.

In this week's version of the Weekly Drop, the blog Vancouver Price Drop gives us our next collapsing asset to profile from the island delta and it's back to Gibbons Drive again.

6691 Gibbons Drive, to be precise.

Assessed at $1,258,600, the realtor's description is priceless:

VALUE HAS AN ADDRESS and it is this fabulous custom designed 4 bedroom, 3 bath (plus den, family room and wrap around decks on both levels) home ON BEAUTIFUL GIBBONS DRIVE, AREA OF MILLION DOLLAR HOMES!

Here is a screenshot of the property listing so you can see it for yourself (click on image to enlarge):

What did they just call Gibbons Drive - area of million dollar homes?

It would appear that Million Dollar Homes aren't what they used to be, at least in terms of financial value.

For, as you can see from the screenshot, despite being currently assessed at $1,258,6000, the asking price of 6691 Gibbons Drive has now dropped to $898,800.

That's a plunge in value of $359,200 or 29% from the last government assessed value of the property... with no buyer in sight, meaning it will sell for even less.

Richmond, BC: a real estate disaster unfolding before your very eyes.

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Email: village_whisperer@live.ca
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The Boomer Trigger

As we wait for news of the Federal Budget, an interesting scenario for you to ponder.

Tuesday's post made reference to Vancouver realtor Larry Yatkowsky and his website comment that a number of his colleagues believed that the Vancouver Real Estate market is currently in a state of  "turmoil."

All the negative reports about Real Estate in the mainstream media are combining with an absence of Asian buyers to severely dampen sales activity.

Tuesday's post also referenced early March data (unconfirmed) from Richmond suggesting that there are 1,000 houses for sale in the previous HAM hotbed with only 80 sold so far this month. This is a profound drop from the approximately 220 sold in each of March 2011 and 2010.

Yesterday Yatkowsky, in his monthly series of community snapshots, profiled Richmond and confirmed the trend of slowing sales with data available to him.

His description: March R/E sales in Richmond are best described as 'sliding into one of the communities deep ditches.'

R/E sales in Richmond have been sagging for a few months now. And for those properties that do sell, it seems that they only do so because sellers are prepared to move significantly on price.

Such is the case with this property at 6231 Gibbons Drive in Richmond.

This 3,500 square foot house sits on a huge 21,857 foot lot in the prestigious Terra Nova neighbourhood.

It's been on the market for a long time, originally listed on February 28th, 2008 for $2,388,000, the home competes for buyers with it's neighbour at 6251 Gibbons Drive (listed for $2,480,000).

Being side by side, the fact that both properties were simultaneously for sale was promoted as a selling point as you can see in this listing for 6251 Gibbons Drive (it makes note of the fact that the neighbouring 6231 is for sale too).

And why not? With almost identical asking prices, perhaps both could be picked up as a package deal, ideal for a speculator looking to develop. The massive lot size makes it a prime candidate in the high end Terra Nova area.

But the property has languished on the market for years now.  

Even at the height of all the HAM insanity, which seemed to bring other Richmond properties in line with it's high asking price, 6231 failed to sell.

Houses like 6231 represent what I like to call The Boomer Trigger.

By now faithful readers are well aware that the majority of the self-indulgent Boomer generation have failed to prepare for their senior years.

Seven out of 10 Boomers do not have enough money set aside for retirement. And since 2011 marked the beginning of the great Boomer transition into retirement, this financial planning statistic is significant.

Starting in 1946, the demographic Post-World War II baby boom began. And the Boomers at the front of this wave have benefitted most from seemingly everything.

After having been raised in the post-war affluence of the 1950s and 1960s, the first wave of boomers entered their mid 20's starting in 1971. As they settled down between 1971 and 1976, these first Boomers bought homes which sold for between $40,000 and $60,000 in suburb communities like Richmond.

Now, as these Boomers head into retirement without adequate funding to carry them through their golden years, the vast majority have a very simple retirement plan: sell their bubble inflated asset of a house, downsize and live off the proceeds.

A average house on a large lot bought in 1971-1976 in Richmond for between $40,000 - $60,000 is now 'worth' between $1.5 - $2.5 million dollars.

Thus the Boomer Trigger... trigger the sale of the one significant asset they have to fund their retirement. At the same time, if the market slows, Boomers can use their original purchase price advantage to under cut other sellers in a collapsing market - a maneuver which has the potential to crash the market if done by a large number of Boomers at the same time.

6231 Gibbons Drive represents the perfect example of this... and why the Boomer Trigger could burst the massive Greater Vancouver housing bubble.

The red hot real estate market in the Lower Mainland has started to turn. Richmond has stagnated. Down 10% month over month. 

Concern is mounting among the Boomers:

• Media reports have covered the stagnating markets on Vancouver Island.
• Kelowna's mounting foreclosure situation is on the radar.
• Whistler hotel condos are off 50% from their peak.
• The Governor of the Bank of Canada has been sounding warnings for over a year now.
• Widespread media reports are now predicting the housing bubble is about to burst.
• Expectations are that Finance Minister Flaherty will introduce a bubble busting budget to trigger a soft landing in real estate.
• The banking regulator in Canada has proposed highly restrictive loan regulations.

And with MOI treding up, inventory trending up, banks withdrawing capital from mortgage lending, Asian money disappearing as China engineers it's own soft landing in real estate and CMHC tightening up thanks to OSFI; it’s all there.

A perfect storm.

Enter the Boomer Trigger. Home owners, like the one at 6231, probably see the writing on the wall. It's time to act and strike a deal before it is too late.

I am told 6231 Gibbons Drive sold this week.  

After lowering the asking price to $1,888,000, the property sold for $1,428,000. That's $960,000 off the original asking price or 40% lower.

It's still a windfall for the owner.  Sure... it's not the $2.4 million he originally insisted upon. But unlike the condo at the Four Seasons Whistler hotel which sold for 50% off the original $1.1 million purchase price, this house was probably bought for only $60,000. 

With that perspective, $1.4 million is a massive appreciation over the original purchase price. 

And coming down almost a cool $1 million off the asking price to make the sale isn't all that hard to do once the psychological barrier of what the property is 'worth' is overcome.

It's the Boomer advantage.

Look for more and more Boomers to pull that Trigger if conditions continue to stagnate as the year moves along.

And if they do, market 'turmoil' will quickly become market 'panic'.

In fact 'panic' doesn't even come close to describing what could evolve.

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Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.