Median selling price in Richmond drops below $1 million to $990,000?

Over on Vancouver Condo Info, the comments section draws attention to an article in the current edition of the local newspaper, the Richmond Review.

Apparently on pg. 22 (the article doesn't appear to be online) there is a piece titled "Home sales slow as prices ease".

Contributor 'Son of Ponzi' says the article claimes the median selling price in Richmond has dropped 6.5% in the past month, falling below the $1 million mark to $990,000.

Horrors! Didn't we use to call Richmond 'HAM central'?

If anyone can find the full article, please send it along.

Meanwhile local Richmond real estate agent, James Wong, is out with his December real estate report:

Home sales in Richmond for November, 2013 totaled 288 units were 11% lower than previous month’s sales of 324 homes. With mortgage rates expected to remain stable at current level, home buyers are in no hurry to commit making a buying decision. Total active listings at the end of November were 2,080 which was just 2% lower than the month before. When compared to active listings the same time last year, current active listings were 4% lower.

The supply of homes for sale in Richmond as measured by months of inventory (MOI) at 6.25% remained around the same level compared to the previous 5 months. The MOI for detached homes remained around the same level the month before. At a MOI of 6.72, home sellers are taking the cue from the market, maintaining their asking prices. The MOI for Richmond townhouses improved further for home seller when the MOI edged from 5.32 to 5.01. The MOI for condos deteriorated slightly, changing from 6.73 to 7.39 due to a slight increase in the number of active listings. The number of total active listings in Richmond at the end of November at around 2,045 units were just marginally lower than the active listings count of 2.080 the month before. Other than condos, detached homes and townhouses in Richmond are holding up well. Compared to a year ago, total Richmond home sales in November at 288 units were 39% higher than the 207 units posted a year ago.

Richmond housing market outlook 

The tapering in home sales in Richmond can be expected the next 3 months due to seasonally lower home buying activities. Well priced properties were selling reasonably well. From conversations with other realtors, many sellers were reported to have turned down low-ball offers. 

The current statistics for Richmond detached homes are:

• Single family detached homes listed for sale - 769 homes. 

• 534 (69%) of these homes are over $1,000,000. 

• The average past 3 months sales for homes over $1.0 million was 51 homes 

• MOI for detached homes over $1,000,000 is 10.47 months of supply. 

• Total single family detached homes for sale over $1,500,000 - 320. 

• The average 3 months sales - 21 units with 15.24 months of supply.

Although home sellers of million dollar homes are under pressure to drop their prices, many sellers are holding on to their asking prices hoping to cash out at prices they are expecting. Agents were lamenting that many of their offers were turned down due to sellers not prepared to meet buyers offers.

Once again Mr. Wong offers a more sobering take on conditions than what we have heard from other quarters.

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The View from Richmond - James Wong's monthly real estate update

Richmond real estate agent James Wong is out with his mid October report on the end of September sales data.

Richmond’s housing market is stabilizing.

Richmond experienced one of the highest run-up in home prices the past 10 years. The fear of a impending collapse in home prices in 2013 did not happen. The built up in the supply of homes in the second half of 2012 slowed down through 2013, aided by improved sales since March, 2013. The MOIs for detached homes, townhomes and condos are now at more balanced levels.

The double digits MOIs for detached homes, townhomes and condos a year ago declined gradually to around 7, 5 and 6 respectively towards the end of September, 2013.

What to expect of 2014?

The 5-year mortgage rate jumped moderately and currently it is about 0,5% higher than 6 months ago. Home prices in Richmond managed to hold at current level after suffering from around 12% drop in values compared to their peaks around the middle of 2011.

When home ownership is reported to be at the 70% level, and average annual household income just over $60,000, the demand for homes are depending on interest rates remaining low for extended period of time. The housing market is fragile. At current price levels, any further spike up in interest rates would defer many first time and move-up buyers from buying.

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An update on the real estate outlook in Richmond

Richmond realtor James Wong is out with his June Report and at first blush it appears market conditions have improved a bit:

Total home sales in Richmond for May 2013 totaled 375 units were 7% higher than the 350 sales recorded a month ago. Higher home sales the past 2 months helped to improve the housing market in Richmond slightly. The slow down in new listings, and improved sales helped to improve the market outlook for townhomes and condos. The slow down in the supply of new listings the past 3 months helped to improve the housing market in Richmond significantly.

Total active listings in May at 2,230 units was at around the same level compared to the previous month’s total listings of of 2,225 homes. With an average past 3 months home sales of 335 units, the MOI for homes in Richmond at 6.66 months for May is a vast improvement compared to the previous 2 months.

Sounds promising.  But that's for the market in total.  What's happening with detached homes, presumably one of the big draws about moving to one of Vancouver's suburb communities:

The situation for detached homes in Richmond did not improve much. The MOI for Richmond detached homes for May at 9.35 months will continue to exert pressure on home sellers. The only way out for home sellers who must sell is to reduce their prices significantly.

Yikes!

Wong continues:

Richmond detached home prices are under pressure to decline further due to the high supply of homes and lower than expected demand from home buyers.

Currently, there are 642 detached homes over $1,000,000 for sale in Richmond. The average monthly sales the past 3 months for homes over $1.0 million was 49 homes. With 13 months of supply, detached home sellers are not seeing much demand for their homes. 

The situation for detached homes over $1.5 million is far worst. With 357 homes listed for sale and average monthly sales of 17 homes, these home sellers are confronted with 17 months of supply, with little hope of finding buyers. The demand for detached homes over $1.5 million is not expected to improve much. 

There are not signs of the market changing for the better for million dollar homes in Richmond.

Hmmm. What about townhouses?

The market for townhouses in Richmond appeared to have stabilized and home prices are holding at current level.

On the face of it, decent news.

How about condo owners?

On the other hand, resale condo sellers in Richmond are in a dire situation trying to sell their condos. The Richmond condo MOI for May at 6.6 months is not a true reflection of the market situation for condos in Richmond. When the unlisted inventories of new condos are added to the pool of resale condos for sale on the MLS® system, there are far more condos for sale than buyers. The competition for buyers by resale condo sellers and new condo developers will inevitably result in lower condo prices in the coming months.

James Wong, telling it like it is.

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"First salvo" fired in condo price undercutting war in Richmond

Yesterday's realtor shills may be insisting that nothing has changed in the real estate market in Point Grey, but a glance southward across the muddy Fraser reveals a very different story.

This is Parc Riviera, a riverfront project in north-east Richmond. It's a 20-acre master planned community with five acres of parks and riverfront trails.

Richmond realtor James Wong tells us that 2013 will be a challenging year for local home sellers because the Vancouver suburb currently has over 10 months supply of homes on the market... with more listings expected in the next few months. 

Wong's assessment is that buyers are in no hurry to buy in spite of all-time-low interest rates at 3.0% or less for 5-year fixed mortgages. Many resale homes are languishing on the market due to lack of buying interest and Wong says this is because home buyers are simply not willing to pay the prices expected by sellers.

Wong suggests that this milieu is what has lead Parc Riviera to fire the "first salvo" in what will be  a serious price undercutting war in the condo market in Richmond.

The developer is now offering pre-construction sale of condos starting from the mid $200,000’s. The selling prices for the first phase of condos and townhouses at Parc Riviera could set the stage for Richmond home prices to come down.

The developer’s ad placed in Vancouver 24 Hrs and Richmond News advertised townhouses selling from $369 per sq ft, and condos from $386 per sq ft. Current selling price per sq ft for resale wood-frame condo in Richmond is around $405 to $420 per sq ft. The pricing trend for new developments in Richmond can be expected to follow similar offers as competing projects are forced to adjust their selling prices. Resale homes will be under pressure to compete for buyers.

Home prices at Parc Riviera are priced some 10% to 15% lower than current selling prices of resale condos and townhouses in Richmond. Current resale lowrise wood-frame condos and townhouses are priced from $435 to $475 per sq ft. Recent sales of condos and townhouses in Richmond were found to be between $400 to $450 per sq ft. The overhang of too many homes chasing too few buyers could only mean lower selling prices for home sellers. Motivated sellers taking low-ball offers are setting the trend for lower prices in the coming months.

It will be interesting to see how other new condo developments respond.

More significantly what will be the reaction from all those condo owners with overpriced units languishing on the market right now? Who will pay those high asking prices when new development's are coming in significantly lower?

Realtor Arnold Shuchat's description of an underwater market in Richmond for SFH's may be about to intensify by spreading to the condo market too.

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The latest from Richmond: sales expected to continue to languish due to "lack of buying interest"

Yesterday we shared with you realtor Larry Yatkowsky's stats which show inventory is hitting highs not seen in years, a pattern which Yatkowsky suggests might be "the hint of the century" about what's going to happen to the market.

Meanwhile, in Richmond, realtor James Wong is out with his latest monthly report on real estate. Wong regularly gives blunt market analysis for his readers and his latest mid-month report is no different.

Wong notes March had a much better sales performance than expected, but his prognosis is still bleak:

Richmond Home sales for March, 2013 at 280 units were 28% higher than the previous month sales of 219 homes. The much better sale performance was expected as seasonally the spring market upswing began in March. It came as a surprise that the total active listings in March, 2013 was about the same number of homes for sale in February. The overall months-of-inventory (MOI) at 9.74 was a slight improvement compared to 10.24 months in February. The drop in MOI was due to the improvement in the average 3-month sales for detached homes, townhouses and condos.

Richmond Real Estate Market Outlook:

The Months-of-inventory (MOI) in Richmond at 9.74 continues to favor buyers. 

Overall, the market sentiment is subdued, while home prices are expected to continue drifting lower due to the lack of buying interest.

Home sellers can take consolation that the pace at which new listings coming into the market in the first quarter of 2013 was more tempered than the same period for 2012. The current negative market sentiment will dampen buying interest, while the over supply of homes will drive home prices lower.

Richmond detached homes are expected to continue languishing due to the lack of buying interest.

There are currently 608 detached homes for sale in Richmond at prices above $1,000,000. With average past 3 months sale around 31 homes, the MOI is at 28.8 months. And for homes above $1,500,000, there are 350 homes available for sale. At an average past 3-month sale of 11 homes a month, there are 31.8 months of supply for homes over $1,500,000.

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Richmond Realtor says Lower Mainland houses overpriced by at least 30% in terms of viable economic investments

Our last post documenting Toronto condo king Brad Lamb's incredulous investment advice ("If you’d rather not eat cat food in your retirement, you’d better invest in condos") generated significant debate with numerous pro-side comments from some industry players.

With that in mind, we offer you Richmond realtor James Wong's most recent take on real estate as an investment.

Wong starts out by comparing Metro Vancouver with Seattle (click on image to enlarge):

Says Wong:

The factors affecting Metro Vancouver detached home prices are not the same as those in Seattle. The graph above illustrates the relative price gains for Metro Vancouver and Seattle from 1994 to 2012. Seattle gained 2 times, while Metro Vancouver gained almost 3 times in value over the same period.

Metro Vancouver suffered short one year drop in home sales and prices during the credit crunch of 2008. Home sales and prices recovered within a year, and moved higher when interest rates were slashed and kept at ultra-low level around 3% until today.

Wong then asks 'what's the future for Vancouver home prices?"

Average older detached homes in Richmond, Burnaby and East Vancouver are currently selling between $740,000 to $850,000.

The current rental income from a older detached home with around 2,300 sq ft living area is approximately $2,300 a month. With a mortgage of $400,000 at 3.15%, amortized over 25 years, an investor is at beak-even point with his/her real estate investment paying $1,925 a month principal and interest. The balance $375 a month from the rent barely covers property tax and routine repairs. Any big ticket item repairs will have to be met with the investor’s own savings.

Wong lays it all out and states emphatically that current home prices in Metro Vancouver are out of whack with rental returns.

In the above example, an investor after providing $135,000 (25%) down payment, and financing his purchase with $400,000 mortgage, his investment will break-even at a purchase price of $535,000. Current home prices are way higher than the above figure. 

Home prices in Metro Vancouver are reversing the gains made the past 6 years. A drop in price of 30% is required before a home in the above areas is economically viable for long term investment.

So Wong's advice to you is that houses have to collapse at least 30% in price before they are economically viable to buy for long-term investment purposes.

Guess he missed out on Lamb's seminar. Either that or he's smart enough to see it for what it is.

Are you?

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Information: three real estate agents who are stepping up to the plate

Have you ever noticed how so much of the real estate industry seems geared towards sellers? 

When it comes to buyers, the industry (on the whole) seems to obsess with whipping them into a frenzy and urging them to snap up property at going rates (or higher).

Who is there to guide their interests and provide them with the data they need to make critical decisions?

This is why critics the frankenumber HPI.  As Garth Turner recently said, "the HPI is to houses what moving averages are to stocks. Instead of telling you what properties sell for now, it tells you what they averaged over time. Realtors love this since it filters out peaks and valleys, making markets seem serene and predictable. But the HPI is as useless to a serious buyer as a four-month-old stock quote is to a trader."

As credit tightens and the easy marriage of sellers with hyped up buyers becomes a distant memory, there are astute realtors who realize buyers need quality information about what is going on in the market today. 

And there is nothing more important than information that gives them both an accurate view of current pricing and information which reflects current market momentum – elements critical to an informed home-buying decision.

On Thursday we showed you how realtor Larry Yatkowsky is now providing median prices of Vancouver homes which, while imperfect, is a tremendous asset for buyers.

Yesterday we profiled the latest market report from realtor James Wong who gives a frank, upfront assessment of the current market conditions.

And today we bring you two of  'Alphabet Arnie' Shuchat's latest contributions.  The first is the Top Price Reductions on Homes for Sale in Richmond.

(make sure you click on the link to see the full list. Screen shot only shows part of the list)

And the second it AA's Biggest Price Declines for Homes in Greater Vancouver. From Arnie's narrative:

A list of every price reduction in the Greater Vancouver market within the Real Estate board of Greater Vancouver (not Fraser Valley) within the last 7 days. I have included the addresses of every price reduction in excess of 5%. To be honest, the current number may only be an indicator of original delusion and may not "yet" reflect a "deal". The property could well have started off too high. I would have to look at each property specifically to see if it could be called a "deal". But the list is a starting point for interested shoppers. You can search the details of the addresses of interest by going to the "Properties" tab on our homepage and clicking on "address" search. I appologize if you are unable to determine what the selling areas are, but they are all encoded. If you are interested further, do not hesitate to call. Shockingly, the total list for the last 7 days for all price changes amounted to 244 properties of which 149 were in Richmond!

Information.  

It's the buyer's biggest ally and there is tremendous opportunity ahead for agents who go out of their way to service this need.

(Note: we would be remiss to overlook a shout-out to Realtor Paul Boenisch who provides the daily inventory stats we use on the right of this blog and whose motto is "knowledge is power")

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Richmond Real Estate Agent: "CNY non-event, actual sales hard to come by."

Real estate agent James Wong is out with his latest assessment of the market in Richmond. Refreshingly frank, Wong once again pulls no punches on the outlook:

Home sales in Richmond for February, 2013 at 219 homes was a 33% improvement compared to the previous month. But, it was 32% lower than the sales registered a year ago in February, 2012. Home prices continued to drift down, and price discounting continued by motivated sellers trying to sell their properties. The supply of homes spiked up 12% compared to the previous month as more sellers put their homes on the market in anticipation of a better spring market.

The overall months-of-inventory (MOI) moved back up from 10.50 months to 12.27 due to the higher supply of homes. The housing market in Richmond leads the lower mainland in having the highest MOI. The Chinese New Year effect sellers were hoping never materialized. The busier viewing activities the past few weeks did not translate into a recovery in the housing market for Richmond.

Richmond real estate market outlook

The busy spring season is with us now. But, the large price gap between sellers’ asking prices and buyers willingness to buy, had resulted in lack luster sales. The standoff is expected to continue as most sellers are holding off making deep discounts to their prices. Homes that were sold were mainly those priced at or below their city assessment values.

The Chinese New Year effect proved to be a non-event for 2013. While viewing activities were reported to have increased significantly, actual sales were hard to come by.

More listings can be expected for Richmond in the coming weeks. The negative market sentiment and buyers holding off buying the next few months will continue to exert pressure on sellers. The current MOI at 12.27 months is expected to move higher to re-test last year’s height of 14.09 months in September, 2012. Richmond’s housing market will continue to suffer due to high inventory and below average sales. Further erosion in home prices in Richmond can be expected in the foreseeable future.

A housing market recovery in Richmond is best tracked by monitoring the MOI. Buyers should exercise caution when buying. The current housing market in Richmond is still trending down. Buying now should be mitigated at prices discounted deeply, and well below current prices. 

Tough challenges for Richmond home sellers

The stand off between Sellers and Buyers will not be solved soon. The slow housing market in Richmond is expected to continue into next year. Motivated sellers who need to sell will bring homes prices down. The only way out for them to sell their homes is to lower their prices significantly to attract buyers. As home prices decline, buyers will stay on the side-line and wait for a suitable time to buy. Until the market stabalizes, the number of buyers willing to enter the market will be curtailed.

Meanwhile the Vancouver Sun has come out with the type of stark housing comparison normally reserved for the blogosphere.

Readers are shown this eight bedroom, 12 bathroom mansion in Roswell, Georgia.

It sits on 3.2 acres and is a 37 minute drive from downtown Atlanta. It includes 23,000 square feet of floor space, a million-dollar pool, a ballroom big enough to display a 10-car collection and a 3,200-square-foot courtyard. 

Asking price? $3.75 million:

Or, if you can go as high as $3.99 million, you can grab this this four-bedroom, three-bathroom ‘solid liveable home’ at 1050 Laurier Ave. in Vancouver's upscale Shaughnessy neighbourhood.

And we didn't even have to airbrush in a fake mansion to get this one on the pages of the Vancouver Sun.

I guess that's an improvement.

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The market looks "very ripe for a meaningful correction"

Last Saturday we profiled this tidbit from 'Alphabet Arnie'

AA told us that:

Terra Nova is like a microcosm for Richmond... and it isn't great.

Well it seems that our other favourite Richmond real estate, James Wong, has also been analyzing the Terra Nova barometer.

On January 21st, Wong blogged about 'the market standoff' in Richmond.

Like in other parts of Greater Vancouver, the real estate market in Richmond can be described as “a stand off” between home sellers and buyers. A typical area to track home prices is Terra Nova, a newer housing sub-division located to the north west corner of Richmond. Terra Nova is a better known by the local residents as one of the most prestigious and expansive neighborhood in Richmond.

And how have Terra Nova home prices done the past few years?

The chart below tracked the home prices for single detached homes with built-up area between 2,600 to 2,900 sq ft. These homes are generally consisted of 5 bedrooms and 3 to 4 full baths, and the lot sizes are from 5,000 to 6,000 sq ft.

Impressive gains to be sure.

At this point Wong gazes into his crystal ball.  What does he see?

The housing market in Richmond the past 8 years had been supported by wealth from new immigrants, not income.

A lot of this is wealth from newly arrived immigrants, although it is difficult to quantify it. Many of these purchases by home buyers the past few years don’t need a mortgage because they have the cash and can buy a house outright. But, with a sharp drop off in buyers, and amble supply of homes for sale, sellers are under pressure to cut their prices.

The possibility of a prostrated decline is real as declining home prices, tightened lending and high prices deter buyers to enter the market.

The supply of rich new residents to Canada is now diminishing, due to the changes happening in the immigration policy for new immigrants. There is a slowing down in people coming to Vancouver, especially foreign residents with a lot of money.

With lack of buying activities, the market looks very ripe for a meaningful correction.

Very ripe for a meaningful correction, eh?

Clearly Wong, an Asian realtor, is not placing much hope in the belief the market will see a Chinese New Year resurgence.

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Sat Post #2: The view from Richmond for 2013 - one realtor sees a glass half full, the other sees a glass half empty

A couple of days ago we brought you a market analysis from Richmond realtor Arnold Shuchat MBA, LL.B., B.C.L.

Dubbed 'Alphabet Arnie' by our cadre of faithful readers, Shuchat had this take on the real estate market in Richmond for 2013:

The average observer may have had his head in the sand in Vancouver, but the market has already moved down some 25% depending upon the particular sector.

Being right in the middle of it, I detect a renewed vigor among buyers as of the end of November. Many listed properties in our market are owned by sellers who do not have to sell and skew the sales to active listing statistical ratio. I see prices holding firm and buyers coming back in. The effect of all this now, is that garbage will not sell as fast as it would have and properties will have to be better prepared for the sale. 

Frankly, from the inside of this industry, I think MacLeans missed their call by about 8-11 months in the west coast market, and, short of producing additional fear into the market by their article, signals to me that additional opportunities can be reaped in the existing climate by betting against broad brush articles with incendiary pictures produced by newsmaking press.

As we mentioned in our previous post, Shuchat is a real estate agent who has been very proactive in advising clients about properties that have declined and where the market is going. His website blog posts have tracked the Richmond market very closely in this regard (and well worth checking on a regular basis if this information appeals to you).

So it is interesting that he appears to be calling a bottom to the market slide and the end to the collapse in prices.

Regulars to this blog know we have come to respect the view of another Richmond real estate agent and regularly profile his views.

And as luck would have it, James Wong is out with his January report and prognostications for the coming year.

Right off the bat, Wong zero's in on the huge number of listings that expired at the end of 2012:

The drop in active listings in the last month of 2012 was dramatic. From around 17,700 at the end of October, active listings dropped to around 12,000 at the end of December, 2012. One-third of the listings disappeared from the MLS system, mostly due to expiry and some of these listings were terminated.

But rather than join the chorus of R/E insiders who see this as a bullish piece of news, Wong focus on a disturbing counter-trend: sales.

The chart below showed a clear trend of declining sales as far back as 2005. The decline in sales could be attributed to high home prices getting out of reach by home buyers. A smaller pool of buyers sustained the housing market and home prices until sometime around mid 2011.

It was clear that the housing market in Greater Vancouver was in decline. With just around 25,000 homes sold during the year, 2012 was not much better than 2008 when a seizure of the financial markets around the world caused a major drop in home sales in Greater Vancouver.

Although the trend-line projection for home sales in Greater Vancouver for 2013 is showing a sale level around 29,000 units. This will not likely to happen due to the fact that there are major forces affecting the market for 2013. Tightened lending standards and negative market sentiment will likely result in home buyers staying on the side-line for some time. The probability of home sales for 2013 staying at current level around 25,000 units cannot be ruled out. 

So Wong thinks conditions are going to lead to another year of abysmal sales. Judging by what we have seen in the first week of January, he is correct so far.

So what will this bearish outlook mean for real estate prices in 2013? Will the slide be halted, as Shuchat suggests?

With weak sales and declining prices already in motion, further price decline is expected to continue. Home prices for condos have already declined and now hovering just above the 2007 price level. Some major news can be expected later this year on presale condo buyers not able or willing to complete their purchases.

Hmm. More price declines and a wave of pre-sale buyers attempting to bail come their completion dates?

Anything else?

The decline in home prices will likely to continue as the real estate down cycle is in motion. The market rally in home prices from 2001 to 2007 was extended due to massive cash injection by the Governments in early 2009. The current Government credit policy to engineer a soft landing is working to reverse the run-away and over-speculative housing market. If the complete cycle takes 6 to 7 years to play out, we could be in for another few years of price decline and low sale level.

Home prices are dictated by buyers, and in a buyer market price decline will continue until a large enough number of buyers are available to absorb the excess supply. A good indicator to watch is the supply/demand ratio or the MOI (months of inventory). When there are less buying interest and a high level of supply, home prices will continue to decline, until confidence returns to the market. We could be facing a 10% or more decline for the next 18 months.

So rather than holding firm Wong see's market prices dropping at least another 10%, if not more.

Wow.

Add that 10% plus drop to the 25% that Shuchat says the market has already endured and you have quite the drop in the cards for Richmond.

It makes for an interesting contrast from two players who are "inside the industry".

We will check back later in the year to see which one is reading the tea leaves correctly.

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Richmond real estate agent's response to the latest wave of optimism?

One of the biggest frustrations from some market watchers has been the failure of the market to 'crash' in spectacular fashion.

But if you have followed this blog for any length of time you have watched the progression.

First it was the outlining areas of B.C. Then it was Vancouver Island.

All last year we charted the periphery of the Lower Mainland, particularly Whistler. And this year it started here with the Fraser Valley and Richmond.

And now, within the Lower Mainland, it is the less desirable properties getting hit the hardest.

Those in the real estate industry tell you there will be no 'crash', just a slight correction - a 'flat market'.  Most significantly, prices will not come down.

But if there is no danger of that happening... why is CAAMP going to Ottawa to lobby for a return to loose mortgage regulations?

The answer is simple... for the bubble to grow there has to be access to easy credit.  Without it, the market will continue to wither.

(And for those who are frustrated at the slow pace of the decline, tomorrow we will hi-light how the pace of that decline has been more significant than most realize)

Real estate agents know the reality of this situation.  And once again, it is Richmond agent James Wong who succinctly summarizes the situation.

As Wong notes, the decline in listings is not a sign the market is strengthening... it is expected at this time of year:

The improvement in the Months-of-inventory (MOI) in Richmond from 12 months to 10 months was due to the 10% reduction in total listings. Many sellers either pulled their listings off the market or allowed their homes expired. The decline in listings is expected to continue for December. Seasonally this is not the time for home sellers to list their homes for sale.

 Sales are still abysmal and any sales that occur, happened because sellers cut their prices:

Sales in Richmond for November at 207 homes were slightly lower than the previously month sales of 225 units. Price discounting continued as motivated sellers tried to attract buyers. 

Will sales improve in the new year?

Many people in the real estate industry are hopeful that home sales will improve after January, 2013. An up-stick in sales can be expected in spring next year, but the overall market sentiment will likely remain subdued.

And why will it be subdued?

There is a marked difference for 2013 and 2012 as the number of active listings at the beginning of 2012 was around 1,655. The supply in 2013 is expected to take off from a higher base at around 1,950 homes by January 01, 2013. Many more new listings are expected to be added to the market after the new year.

What will the flood of listings do to the market?

The large number of listings in Richmond will result in more sellers lowering their prices to sell their homes. Current market sentiment is not expected to change much. Buying activities are likely to remain subdued. Many homes in Richmond are expected to sell below their city assessment values.

More price erosion can be expected as many home buyers are expected to stay on the sideline. Majority of these buyers know that it is to their advantage to wait for the market to continue its correction. Buyers when making offers, typically test sellers’ motivation by making low ball offers.

Why all the low ball offers?

The market situation for Richmond detached homes remained depressed. There are currently 540 homes for sale at prices above $1,000,000. With average past 3 months sale around 33 homes, the MOI is at 16.36 months.

This is a slight improvement from 17.88 months in October, partly due to expiry and 10 homes reducing their prices to below $1,000,000. There are 293 homes over $1,500,000 in Richmond. At an average sale pace of 12 homes the past 3 months, this translates into 24.42 months of supply.

2013 will be another difficult year for Richmond.

Wong summarizes exactly what the problem is... a problem CAAMP is also worried about:

The absence of home buyers, dampened market sentiment, and tightened lending rules are expected to continue into 2013.

The current MOI though better than the past 2 months, will likely be reversed when more new listings hit the market the next few weeks.

There are no signs of the Government changing or relaxing the current lending directives to Canadian Banks. Richmond’s market for 2013 is expected to have persistently high number of homes for sale and below average buying interest.

All of which is adding up to create the perfect storm in 2013... a reality real estate insiders are privately very afraid of.

Speaking of dealing with the current market dynamics, have you seen real estate agent Owen Bigland's reality check for seller's when it comes to listing you home for sale in today's market?

(video posted 2 days ago):

"Let's talk about pricing. One of the biggest mistakes people make, or seller's make, is they price the home according to their needs as opposed to what the market is dictating.

In other words they say we paid $800,000 for the home 3 years ago, we need to net $800,000 today.

Well, unfortunately, the market doesn't work that way. A home is priced based on the current fundamentals."

And the current fundamentals say you need to lower your expectations. What a paradigm shift from only 12 months ago.

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Richmond real estate agent: Recent sales momentum 'not expected to turn market around'

As expected, October 2012 home sales were higher than those in September 2012. But October still came in as one of the worst months in the last 15 years.

Some might cling to that increase as a sign of upcoming market salvation.

Some... but not all.

Richmond Real Estate agent James Wong, who is out with his November 2012 market report makes no bones about his take on that uptick in sales last month:

The sale pace though improved, was not expected to have the momentum to turn the market around. There were some price discounting by motivated sellers, but most home buyers were reluctant to make their purchases.

Wong still see's dismal conditions in Richmond:

In spite of many homes in Richmond being listed at or below their city assessment values, many of these homes were not selling. Most home buyers prefer to wait and watch how the market will turn out the next few months. Buyers who were making offers, typically make low ball offers on homes they were interested to buy. 

Most homes sit on the market, and home sellers are reluctant to make drastic price cuts to sell their homes. 

Listings had dropped off gradually over the past 4 months as sellers either took their homes off the market or allowed them to expire.

In fact things continue to be so bad that:

the in-balance in supply and demand is putting pressure on Richmond home sellers to accept or reject offers that are far below their expectations.

And what is the status of that current "in-balance"?

The months-of-inventory improved from 14.09 last month to 12.38 months in October. Comparatively, Richmond has a large over-hang of resale condos competing for buyers with presale new condos under construction.

There are 588 Richmond detached homes for sale at prices over $1,000,000. With average past 3 months sale around 33 homes, there are 17.88 months supply of homes in the market. For detached homes over $1,500,000, there are currently 309 homes for sale. With an average past 3 months sale of 14 homes, this translates into 22.07 months supply of homes.

The in-balance in supply and demand is putting pressure on Richmond home sellers to accept or reject offers that are far below their expectations.

In this report, Wong takes a moment to share with his readers what they should expect of the Richmond housing market for 2013:

With the housing market sentiment dampened, absence of of home buyers and Canadian banks having to follow the new lending rules, 2013 will be a difficult year for home sellers, builders and housing developers. The decline in home prices will likely take many years to play out.

In a market with abundant supply of homes, sellers will lose out. The health of the housing market is best tracked by following the months-of-inventory (MOI) number presented on this site. At current MOI level around 14, it will take some time for the number to improve. This MOI number has to get down from 14 to 10, 8 and then 6 before the market stabilizes.

With the Canadian Government curtailing credit to deflate the real estate bubble, real estate prices can only decline. Unless the Government makes drastic changes to the new lending rules, home prices will continue to decline for some time.

If the housing down cycle from 1995 to 2001 downturn is repeated, we could experience home price decline and slow sales for many years. The market is expected to have persistently high number of homes for sale, and below average buying interest.

Once again we tip our hat to Mr. Wong for his honest, succinct assessment of today's real estate landscape.

It is a refreshing breath of consistent honesty.

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One simple message right now: Pull the Boomer Trigger... before it's too late.

So for the past two days we have focused on Richmond real estate agent James Wong and his stunning assessment of where the real estate market is going.

Whether or not you question if the graph he originally posted (showing average prices cascading down 70%) was an accurate assessment of where he thinks the market will end up, his assessment on the state of the market is clear and precise:

If home sales and prices continue to slide, it could take many years before the market stabilizes. 

Judging from the huge run up in home prices, the drop in prices on the way down could be just as severe. A market correction will take many years to reach a level when home buyers feel comfortable again to enter the market. 

We are now witnessing the unwinding of the housing market. The severity and pace of price decline are dependant on the interaction of buyers and sellers perception of the market. At current price point, getting financing for a family earning $65,000 a year with 5% down payment will allow the buyer to afford a home valued at $294,000. 

It will take many years before owning a home makes sense again. Home prices are not going up now or holding. Instead, the housing market is coming down in value. The rush to exit the market will take its toll on sellers who bought their homes recently.

One thing we didn't cover in the past two posts is his October market report that outlined the end of September sales statistics for Richmond.

Wong's conclusion at the end of it all is clear: if you want to sell, you need to cut your asking price significantly below current assessed value:

September home sales in Richmond did not reverse the low sales the preceding months in July and August. 

With total sales of 173 homes, September home sales in Richmond turned out to be worst than the previous month sales of 179 homes. 

Active listings for detached homes, townhomes and condos/apartments in Richmond at the end of September, 2012 totalled 2,663 units, was at about the same level in August, 2012. 

The lack of buying interest was the main cause for slumping home sales in Richmond. In spite of some aggressive discounting by home sellers, buyers were not motivated to make their purchases. 

The supply and demand for homes in Richmond deteriorated further in September, reaching 14.09 months compared to the previous month’s ratio of 12.51 months of supply. 

Richmond real estate market outlook 

Market sentiment has deteriorated further... The only way out for sellers who are determined to sell was to price their home more aggressively. Sellers who are taking deep cuts in reducing their selling prices are likely to sell their homes. Many homes that were priced according to the market, failed to generate much interest from buyers. 

In the next 3 months, home sellers are likely to either pull their listings or allow them to go expired. Richmond detached homes are expected to suffer the most in price erosion. 

Richmond detached homes over $1,000,000 are not seeing much buying interest. With total active listings of 686 and average sale around 28 homes the past 3 months, there are 24.5 months supply of homes in the market. 

For detached homes over $1,500,000, there are currently 353 homes for sale. With an average past 3 months sale of 12 homes, this translates into 29 months supply of homes. 

The decline in housing sales and home prices in Richmond will take many years to play out.

You get the feeling Wong will be the hit of the Christmas holiday house party circuit this year.

But it's not just James Wong who is bringing us the hard uncomfortable truth of the current real estate market. Vancouver West Side real estate agent Sam Wyatt is out with his October market report as well,

And judging from the title (October Real Estate Update: Attached and Condos Feel the Chill), you get the impression Wyatt isn't gunning for the Tony Robbins R/E Positivism Award either.

In fact Wyatt's message is remarkably similar to Wong's... if you want to sell, cut your asking price and make it a DEEP cut:

For the first time in over 6 months, the Months of Inventory (MOI) metric for Westside Vancouver houses dropped slightly. It had risen from 4.39 in February to 13.27 in August and in September sat at 12.14. 

The big news for September is that both attached homes and apartments rose again, now to over 10 months of inventory. It might be that Months of Inventory has crested for detached homes but my sense is that it is still likely to get worse. 

There were 86 houses sold on the Westside in September which is up from 75 in August but such a paltry number of sales can hardly be considered an improvement. 

Even as sales improved, active listings increased from 995 in August to 1044 in September. 

The average price of detached homes fell to $2,259,214. 

Apartments and attached homes are now really beginning to feel the chill of this falling market. With MOI over 10 months for each of these home types, we can expect to see prices fall. 

In fact, the average price of an attached westside home has fallen to its lowest point since June of 2009 to $749,668. 

Sales success ratios for the westside are still only about 30% which means that the vast majority of listings fail to sell. If you want to sell, you will need to price BELOW the most recent comparable sales prices and you need to do this from the very beginning of the listing. If you don't do this, your listing will almost certainly stagnate. I continue to succeed in making sales happen with this technique.

Wyatt's message to those rare real estate buyers who are actively searching the market right now?

More sellers are recognizing the change in this market and beginning to negotiate in earnest.

And negotiating in earnest is the only option right now.

Those hoping for Industry pressure to reverse federal government liquidity tightening measures are bound to be highly depressed at the latest news coming out about Canadian debt levels.

Canadian households are even more in debt than anyone imagined, according to a revised Statistics Canada calculation that gives a more accurate picture of family finances. 

The revisions place household credit market debt in the second quarter at 163 per cent of disposable income, well above the previously reported 152 per cent. 

The revision shows debt growth over the last decade that looks “eerily similar to the U.S. experience, just before their dramatic housing bust,” said David Madani, an analyst with Capital Economics. 

“Overall, this supports our bearish view that Canada’s housing boom is unsustainable and the eventual correction, which we think is already underway, is likely to have a material negative implications for growth,” he said. 

The revisions show a much steeper climb, with debt growing in each of the past six quarters.

The news has TD bank economist Diana Petramala saying that the overall results show Canadian households are more vulnerable to a housing correction than previously thought.

Although Canadians hold more assets than their counterparts in the U.S. and the U.K. did before the crash, most of those assets are locked into the value of their homes, which could take a tumble in a housing correction or if the economy tanks.

So if you are a Boomer at the front of the Boomer retirement wave (with tremendous unrealized capital gains sitting in a bubbled valued piece of real estate)... what is the crystal-clear message being conveyed right now?

If you bought your property more than 20 years ago, and you have the ability the move significantly on price... DO IT!

Can you say Boomer Trigger?

(We've profiled Vancouver houses with asking prices as much as 23% below official assessed value. Let's see who can find the first with an asking price 25% or greater below assessed value)

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Touching a nerve: Was a Richmond real estate agent forced to remove a graph plotting a potential 70% decline in housing prices?

On Sunday we told you about Richmond real estate agent James Wong.

Wong has, over the past few months, regularly published the abysmal real estate sales statistics from the former HAM infused Vancouver suburb and given clients his frank and honest assessment of what it would take to sell your home in these conditions.

On August 9th, Wong wrote:

"In Richmond, there is a high probability of a price decline for detached homes in excess of 30%... Sellers who need to sell will have to cut their prices more deeply to attract buyers. This could be the beginning of a real estate down cycle... The cascading effect of declining home prices will snowball, causing more home sellers to sell before home prices drop further... The biggest problem faced by home buyers are getting their mortgages approved. Canadian banks are now required to underwrite their mortgages based on borrowers’ ability to debt service their loans. The cascading effect of declining home prices will snowball, causing more home sellers to sell before home prices drop further. Unlike 2009, even if home prices drop 20% or more, many home buyers and investors would be prevented from buying due to the difficulty in getting financing.

Wong's commentary is a refreshing change from the rah-rah boosterism we are used to hearing from the real estate industry.

With each passing month, as conditions continue to worsen, Wong has become even more straightforward with his analysis.

The ultimate from Wong was released this past Sunday.

Titled, Are We Headed For a Housing Market Downturn? Wong outlined a very bearish scenario for real estate over the coming months and years and predicted (with a graph) a 70% decline in real estate values.

However, if you go to his site today, you will not see the exact same article as you would have seen if you went there on Sunday.

Oh, don't get the wrong idea.  James Wong still makes the same case he did two days ago. But a significant element has been removed.

Here are 2 screen shots that capture Wong's original Sunday post. Click on these images to enlarge them and see if you can spot what has changed:

Contrast those screen shots with this screen shot of his current post:

Notice what's missing?

In the original post Wong took a stab at predicting where things might be going by plotitng a “reverse image” of the Greater Vancouver price chart (with home price topping around March 2011). He hypothesized how a down cycle for real estate might play out, including the potential duration and extend of the price decline over the next few years.

Wong's chart was a classic tracing of the formation of a bubble and how a bubble unwinds.

(For a great video on 'Bubbles and how they unwind' by Chris Martenson, see this post from June 5, 2009).

Regrettably it appears Wong's chart was censured because the chart has been removed and replaced by this passage (click on image to enlarge):

A disclaimer was also added at the bottom of the post which reads:

Clearly Wong's chart touched a nerve and so much negative feedback that he was forced to remove the industry graph he modified to make his case.

To Wong's credit, he maintains his belief in his original message.

But it gives you an indication of just how significantly his observations have touched a nerve.

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