August 2010 stats

Well, the August sales numbers for real estate are now coming out.

The benchmark price, an average for typical homes sold, was down almost 3% in Metro Vancouver to $576,597 compared to the peak $593,419 which was hit in April.

In the Fraser Valley, the benchmark price for a typical detached home dipped almost 2% to $510,107 in August compared with $520,423 in April.

As we mentioned yesterday, the exception to all of this were the statistics for the west side of Vancouver where prices rose last month.

And while that bit of new is a silver lining, the stats are bad news and it marks the third consecutive gloomy month.

Look for fall the be battle royale against this developing trend.

Bank of Montreal is leading the assault to overturn this looming tide. BMO has chopped its benchmark five-year mortgage rate to 3.59%, down from 3.79%, making it one of the lowest five-year rates ever offered by a Canadian bank.

Trumpeting the news is Martin Nel, a senior BMO official, who said “It’s a great time to buy a home,” in a news release announcing the change. He added that people who take advantage of the offer will benefit and went on to stress, “if ever there was a time to buy, it is now.”

You can almost sense the desperate undertone. Listings are up, sales are down and prices are starting to slip.

In the industry this is called 'downward pressure' and it's not hard to see what will be coming this fall to counteract this.

Watch for a plethora of news items trumpeting the fact mortgage rates coming down to their lowest points ever and that low mortgage rates and lower housing prices mean that prices will be shooting up again soon.

You know the drill: Buy now... or be priced out forever.

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Do I sense a divergence in the correction?

Later this week the sales totals will come out for the month of August and they will continue a trend that has defined the past three months.

The summer months of 2010 have been marked by a dramatic decline in sales, building inventory and price reductions galore. And bearish market watches sit poised to gleefully herald the long anticipated market correction.

But while August stats will be ample fodder for this outcome, the month's statistics also contain a foul element for the bearish community.

Back in springtime the average price of a detached house price in Vancouver broke through the $1,000,000 mark. And while it declined to $941,275 in July, the August figure has jumped back up to $999,407.

How can this be?

As record low individual sales are broken down, I suspect we will see more westside homes like this one profiled in the Vancouver Sun.

A prime example of some of the bizarre sales of high end homes, this 4-bedroom, 5-bathroom 2,462 sq. ft home (with a measly 33 ft frontage) located at 4036 West 19th Aven. was assessed by B.C. Assessment in July 2010 at $1.508 million.

That, however, was 'assessed' value. The owner listed the house way over assessed value and asked $2.388 million

After 9 days on the market it sold for $2.39 million.

And that has been the hallmark of the Vancouver market and one of the surest signs we in are a massive bubble: when people massively overpay for an asset.

Those conditions are clearly at play now. And even with a dramatic reduction in sales, those houses that are selling are exchanging hands at values dramatically higher than assessments.

The end result is that the average price rises despite the dearth of sales, such are the ridiculous asking prices currently being trotted out by speculators and long time owners alike.

Even this house, which sold below asking price, sold at a ridiculous price.

Located at 3946 West 30th Ave. in Vancouver, the house was purchased in 1981 for $195,000.

This summer it was listed with an asking price of $2,188,000. After 51 days ti sold for $2,050,000.

Thus is the state of the Vancouver Real Estate market, North America's most bubbly real estate market.

The R/E cheerleaders will point to this sales as an example of why it's different here... hallmarks of Vancouver's resiliency.

History is replete with stories of excess at the end of boom times. And the Village of the Rainforest is no different from those tales.

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Whither the empty lots?

Today the big news is the ongoing freezing up of the real estate markets.

From the Globe and Mail comes word that in Toronto the R/E market continues it's dismal performance in sales halfway through the month of August.

Meanwhile in Vancouver a contributor to the blog Vancouver Condo Info has posted sales statistics which indicate sales for new units (homes, condos, townhouses) in Vancouver West is on track to be the worst in a month of August in the last 15 years (only 6 units sold by August 17th - the worst August in the last 15 years was in 2008 when only 30 new units sold).

Ultimately the only figure that matters is price. But has noted on July 26th, there is a tremendous amount of inventory in the Vancouver market. MPC Intelligence Inc., a local market research firm, counted 6,659 condo units being put into the marketing phase between March 1 and July 1, 2010. This compares with just 1,937 that were on the market in 2009 and 5,066 in 2008.

It won't be long before developers start to slash prices in a desperate attempt to dump inventory. As we have already noted, Bob Rennie slashed prices last month by 40% because he could see this writing on the wall.

Which makes one wonder about the area around the stagnating Olympic Village. Vacant lot after vacant lot surrounds Millennium (Under) Water, each with giant signs up promoting pre-sales. If the completed Olympic Village isn't selling at all, you know none of these are moving either. Driving down the deserted 1st Avenue, I couldn't help but think that the area looked like some American ghetto... albeit one where the buildings and streets were brand spanking new.

It was eerie.

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