Media notes R/E groups attempting to "calm fears of a local housing crash"

On Thursday we told you how the media was filled with economists and 'experts' who were now predicting that prices will, in fact drop, but will do so by a moderate level that does not resemble the U.S. crash.

The purpose of all these ascertains? Preventing panic. A fact the Vancouver Sun noted yesterday:

Greater Vancouver will see home sales tumble by one-fifth this year, but the market should rebound in 2013, the B.C. Real Estate Association says in its new forecast as the group moves to calm fears of a local housing crash.

It is exactly those types of fears which are encouraging sellers to accept 75 cents on the dollar for properties (examples of which we have profiled over the past couple of weeks).

Of course the sellers aren't actually taking only 75 cents/dollar on their real estate.  Most bought before the big blow-up of the bubble during the 00's and they are still enjoying a large capital gain.  They just see the writing on the wall and are cashing out while there are still profits to be realized.

And those signs are everywhere.

Vancouver movers are reporting stiff declines in business due to the falling real estate market and the slowdown is effecting a broad segment of society:

Tradesmen, Builders and Craftsmen, worry about the later half of 2012 and the speculation around the slow down of the Vancouver Real Estate Market... Competitively priced houses are now sitting on the market for an average of 5 to 7 months. 

Scott Moe of RE/MAX says: "All across the board people are saying how slow it is out there. I have 24 listings right now and only had 4 showings on the weekend!" The slow down of BC's real estate industry extends well beyond just builders and realtors. Many local businesses are affected by slow real estate sales.

Which is why early signs of panic are now starting to pop up.

And there signs of more problems ahead.

Concerns are spreading through the Chinese media with headlines that: “All Canadian banks will introduce new mortgage rules by November 1st, 2012”What will those new rules entail?

All-Canadian banks and financial institutions will start on the 1st of next month to take up increased tightening housing mortgage measures. There will be new rules for those without sufficient proof of income documents.  This will include the self-employed who will only be able to obtain no more than 65% of the mortgage property value in their loans. Prior to the implementation of the new requirements, some banks allowed self-employed people up to 75-80% of property values in a mortgage. 

Mortgage experts believe that the new measures will have the greatest impact on new immigrants.

As one contributor on VCI noted (hat tip VMD), the OSFI will require lenders to limit maximum LTV ratios of “nonconforming residential mortgages” (eg. Self-employed without adequate income verification) to 65%, meaning the borrowers will need to put 35% up as a down payment.

New immigrants will be impacted due to inadequate income documentation, which looks at average income of the last 2 years. - (Previously new immigrants were required to put down 30% DP) - 

HELOC LTV limitations will be implemented by Nov 1st as well.

In other words, the saviour of wealthy Asians buying our overvalued property at prices high above what local incomes can support is about to take another big hit.

Combine that with tightening regulations on what entry level buyers can now overspend on greasing the property ladder at the entry levels and you have a recipe for even steeper declines.

Perhaps that's why a Winnipeg real estate agent is now running this ad (hat tip Makaya):

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Seller's Unite!

On Tuesday we were telling you just how bad it is for real estate sales in Richmond right now.

Realtor James Wong's monthly R/E report, released June 16th but covering the May 2012 sales data, advised that total listings have hit all time highs, daily price reductions are common, and detached home listings in the million dollar plus category are dying on the vine.

Of the 556 homes on the market with an asking price north of $1,200,000, sales have been so bad that there were 17.7 months of inventory on the market by the end of last month.

Wong's advice to sellers was blunt: If you have to sell, much deeper price cuts are needed.

And if the data from the month of May was bad, June's results are abysmal.

Using sales reported between May 27, 2012 and June 26, 2012, and actives as of today... there is now 23 months of inventory on the Richmond Real Estate market.

Word has it that for the majority of those rare sales that are occurring, most are closing below assessed value of the property as some sellers are obviously taking Mr. Wong up on his sage advice.

But as you can imagine, this is causing a great deal of consternation for other Richmond sellers.

One Chinese real estate forum is calling on 'sellers to unite' to prevent further price drops. (hat tip to VMD on Vancouver Condo Info).

“A brand new house in good area of West Richmond, 8111 Dalemore Rd, was just sold for $1.58M, $170k lower than assessed price of $1.75M. It’s a shame that the (owner) went through so much to purchase this property and build a new house, hoping to earn some money while doing a service to the community, only to (then) recklessly slash (the) price. I call on the sellers to withhold giving in to under-asking offers. We should all pull our listings and wait until a better market to sell in a bidding war situation”

Of course, as VMD notes, do not lament too long for the hardships endured by the seller at 8111 Dalemore Road.

The 5 bedroom, 5 bath mansion was built in 2010 to replace an old-timer teardown which last changed hands for $533,000.

And while the property did recently sell for $170,000 below the 'current' assessed market value of $1,750,000, a final sale price of $1,580,000 hardly qualifies as hardship for this seller - right?

Or does it?

Maybe it really is "a shame that the buyer went through so much to purchase the property and build a new house" and not have it sell in the type of bidding war that one year ago would have realized offers of $300,000 - $400,000 over asking.

Perhaps I am being callous to the needs, hopes and dreams of the Richmond speculator?

Proletariat Unite! Protect the Richmond real estate flipper now!

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Email: village_whisperer@live.ca
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