Wed Post #2: June sales data forces declaration of 'buyers market'.

As noted in today's Vancouver Sun, the number of residential property sales has hit a 10-year low in Metro Vancouver leading the Real Estate Board of Greater Vancouver (REBGV) to declare a buyer’s market.

But even with another month of declining sales, rising listings plus an average detached house price that has DROPPED 14% in just four months... the REBGV gleefully headlines (and the Vancouver sun obliges) that the Benchmark price for detached properties has INCREASED 3.3% from June 2011 to $961,600

To think, it only took two changes to way the HPI Benchmark price is calculated in 2012 to pull this rabbit out of the hat... ain't statistics grand?

The Vancouver Sun notes that this recent REBGV announcement is significant since the board has in recent months been calling the market “balanced.”

How painful was it for the REBGV to bring itself the make this declaration?

Of course this is the same REBGV which Vancouver Sun columnist Pete McMartin recently observed:

would have viewed the crash of the Hindenburg as the result of “normal deflationary conditions.”

According to the REBGV’s June report, sales of houses and apartments dropped to 2,362 last month, a 27.6% decline compared with 3,262 sales in June 2011, and a 17.2% drop from just last month.

The ugly truth is that June sales were, in many categories, the lowest totals for the month in the region since records started being kept in 1995 and 32.2% below the 10-year June sales average of 3,484.

Even Global TV was recently moved to call the Vancouver market 'depressed".

If it's a buyer's market, why aren't homes selling?

You just can't put lipstick on this one.

==================

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

Please read disclaimer at bottom of blog.

Are bloggers Public Enemy No.1 in an attack on the fundamentals?

Watching the news this week, you can  can see the real estate industry mounting their latest counter offensive to spin their message.

And that message will be... 'fundamentals don't matter'.

Despite having rejigged they way the benchmark price is calculated (twice this year, actually), the reality of the market is becoming hard to ignore.

Sales in May for all forms of housing across the Multiple Listing Service were down over 15.5% from last year, and the lowest for the month of May since 2001. For detached homes sales, the news is  even worse: They were down 25% for the same period last year.

While sales have fallen, the number of listings has risen. In the Vancouver westside, which is held up as the main beachhead for the Asian invasion, the total of active listings — those homes for sale that haven’t sold — has risen to 1,100 properties at present from 600 a year ago.

The pathetic attempts to neutralize the impact of these figures prompted Vancouver Sun columnist Pete McMartin recently to state the obvious:

Commenting on these numbers, the resolutely sunny Real Estate Board of Greater Vancouver decided this was “indicative of balanced market conditions.” But then the board would have viewed the crash of the Hindenburg as the result of “normal deflationary conditions.”

Yesterday we drew your attention to one of the latest piece by Global TV (Global reports the facts, concludes ours is now a 'depressed market', but then claims we're 'different').

 Global has also been unable to ignore the obvious:

Vancouver Real Estate had defied trends and showed steady growth for far longer than anybody believed possible. The evidence is not in the polls, which very often contradict one another, but on the ground, in the neighbourhoods where plum properties have always sold quickly and at a profit. Sellers are finding the days of multiple, over-asking offers have disappeared... and buyers are getting the pick of the crop with buyer reduced signs popping up all over the place.

They were even forced to admit that Vancouver is now "a depressed market".

So if the spin no longer works and the ugly numbers cannot be ignored, what do you do?

Invalidate the usefulness of the numbers, of course.

You could see the strategy launched when Bob Rennie spoke to the Urban Development Institute on May 17, 2012. Rennie said:

I joked with the CHMC’s board a couple of years ago, that the Vancouver market never went up on fundamentals, so why would we go down on fundamentals.  

However, our market really does have fundamentals but our fundamentals cannot be captured in a 90 second elevator conversation, at the water cooler, in a sound bite, and especially not on a blog or 140 character tweet.

And what are those fundamentals that cannot be captured in a 90 second conversation?

I think we saw that in the Global TV piece yesterday as well.

The spin we are going to see is the same as we have heard over and over before. "Rich people wanna live here.  We have limited area due to the mountains and the ocean.  And we have the scenic and lifestyle advantages of those same mountains and ocean." 

This is basically what Global TV said when they trotted out Tsur Sommerville:

Sommerville: Now we have a situation where prices aren't rising, they're flat. We have a situation were listing are rising, sales are falling and there isn't any of the kind of angst or anxiety out there in the marketplace. Instead what it's replaced with is less worries about people driving prices up and more worries about Greece blowing up the world economy.

Global Reporter: Vancouver is that market that is way different than any other kind of market.

Sommerville: Vancouver is very hard to figure out because so much of the purchases are done by wealth. Either people immigrating with wealth or people receiving wealth from parents or relatives so the normal 'what are incomes doing and what are prices doing', that just doesn't work out here well.

Global Reporter: And that may explain that while there are price reductions, average selling prices just aren't going down. Unlike other depressed markets in the world, there's no pressure to sell. And with our geography, the mountains and the ocean, it's not likely to change.

I suspect this will be the theme for the foreseeable future.

Claim prices simply can't go down here.  Tell everyone that wealth wants to be here. And desperately try to convince you to "buy now or be priced out forever".

And to the one segment of the community that the industry can't influence the peddle this message - the blogosphere - Rennie summed up his frustration in that May 17th UDI speech:

I do have a huge concern over what Tracie McTavish, the president of our company calls, your “Keyboard Courage”, referring to what is becoming a dangerous and apparently acceptable practice which is, negative market commentary that is nothing but speculation.

Speculation made by spineless, signature‐less, individuals on a blog, on a blog that in most cases has less than 500 followers.

Then the next thing you know, the mainstream media picks up on the negative as fact and all of a sudden, it’s breaking news and our industry spends the next 6 months attempting to dispel the rumors and sound bites.

The dispelling of the "rumours and sound bites" of the basic market fundamentals (ie. the inescapable reality of the hard sales data) has begun.

And it would appear that in this attack on the fundamentals, the blogosphere is being cast as Public Enemy No.1.

==================

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

Please read disclaimer at bottom of blog.

Misplaced anger?

Back on March 22nd, Vancouver Sun columnist wrote a column that garnered a lot of attention in the real estate blogosphere.

Ostensibly the article was an attack on affordable housing.  A view reinforced by the headline which blared: "Affordable housing in Vancouver? Who wants that?"

It made me chuckle.

If you talk to those scribes who write for the mainstream news and have a conversation with them about their profession, there is one interesting complaint.

They don't get to write the headline for their columns.

It's their Editors who do that.  And often the writers themselves disagree with the choice of 'eye-catching' headline.

This particular column about the Vancouver housing scene was a rant against Social Engineering.

McMartin's opinion is that the meddling of the Social Engineer's rarely works and more often causes more problems than it solves.

In the case of housing affordability, he offered this quote:

"There's nothing that this task force can do to make Vancouver as inexpensive as Toronto or Edmonton. But I do believe it will mean changes in the processing of building permits, and in the wording of zoning bylaws that ultimately will lead to increased competition and more affordable housing choices."

To which McMartin countered that this would lead to more densification - an outcome he did not believe people wanted.

McMartin closed with another quote:

"The only thing that's going to make housing in Vancouver cheaper is a collapse in housing prices."

To which he replied:

Hands up, you well-meaning social engineers, who want that.

Now the real estate bear community jumped all over McMartin for this.

I think he got a bad rap, personally.

He was railing against social engineering.  The point he was making is that all the social engineers would create was more densification... not affordable housing, something most of us don't want.

McMartin was saying that the only thing that would create affordable housing was a collapse in housing prices. A fact, he noted, that none of the social engineers would actually want (if only due to the havoc this would create on social services).

And I agree with the point of the March article.

But because McMartin had spoke about his own travails with home ownership when he first moved to Vancouver, he was vilified for appearing to be against deflating the housing bubble.

Today McMartin came out with another article.

It concludes by noting:

"In the meantime, in the very near future, on Monday, Mayor Gregor Robertson’s Task Force on Affordable Housing will deliver its recommendations. After months of consideration and research, city hall will finally reveal how government can make housing more affordable, despite the fact that the market has been busily doing just that. In real estate, timing is everything."

It's another cheap shot at Social Engineering.

Those who want regulations on flipping houses, or regulations on foreign buyers, etc... they are missing the point.

Our real estate bubble has been created by cheap credit and policies that accommodated massive debt.

Flippers, speculators and foreigners may have capitalized on it... but they are not the problem to be addressed.

With this latest article, McMartin will get flack from the real estate blogging community again.

The headline, "The Market is Teetering! Happy Now? implies McMartin is unhappy with the regulatory changes that have just been made instead conveying what his column is actually doing: taking a shot at the social engineers.

McMartin isn't criticizing the steps just taken by Flaherty and Carney, he's taking yet another cheap shot against the Social Engineers.

And I completely agree with him.

Hopefully most of the blogging community appreciates what he is railing against.

Side note

Some interesting stats in the body of this latest article.

Meanwhile, Metro’s real estate market is holding its breath. Or possibly it’s stopped breathing. It’s hard to tell.

Sales in May for all forms of housing across the Multiple Listing Service were down over 15.5% from last year, and the lowest for the month of May since 2001.

The news for detached homes sales was even worse: They were down 25% for the same period last year.(Commenting on these numbers, the resolutely sunny Real Estate Board of Greater Vancouver decided this was “indicative of balanced market conditions.” But then the board would have viewed the crash of the Hindenburg as the result of “normal deflationary conditions.”)

While sales have fallen, the number of listings has risen. In the Vancouver westside, which is held up as the main beachhead for the Asian invasion, the total of active listings — those homes for sale that haven’t sold — has risen to 1,100 properties at present from 600 a year ago. That is, during all the time the alarmists were certain that Asian buyers were pushing up house prices across Metro, the market in that neighbourhood most cited as the cause of those rising prices was already languishing.

The take-a-way here is that the dreadful statistics are now getting mainstream coverage.

Combine this with the press from the latest Flaherty, Carney and OFSI offerings and the psychology of the general public regarding real estate is taking an absolute beating.

It will be fascinating to watch the last half of this year.

==================

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

Please read disclaimer at bottom of blog.

In BC... we are not Alfred E. Neuman

In the last post I talked about blissful ignorance, a comment triggered by Financial Post article which covered a recent poll by The Investors Group to find out if homeowners across Canada were concerned about the recent rate rises.

Now one thing stuck out in my mind.

Could people living in the Greater Village on the Edge of the Rainforest really be that ignorant?

Turns out Vancouver Sun columnist Pete McMartin was wondering the same thing. Working with Sun colleague Fiona Anderson, the pair advises that the Investors Group had seperate statistics on the issue for B.C., in general, and Vancouver in particular.

Seems we are not as 'blissful' as the rest of the country. And with good reason.

Among all respondents, British Columbians reported carrying the highest mortgages, with a median amount of $180,000, or $50,000 more than the national average.

But that median mortgage amount of $180,000 was for all of B.C.

Kevin Lutz, regional sales manager and mortgage specialist with the Royal Bank, said he figures new mortgages in the Metro area average around $350,000. Brian Peterson, president of the Mortgage Brokers Association of B.C., who canvassed some mortgage brokers in the Metro Vancouver area, said local brokers were telling him it was not uncommon to see new mortgages in the $400,000-$450,000 range, typically for buyers who are stretching their borrowing powers to the limit so they might get into the market.

I have 17 friends who are also stretched and each have mortgages over $500,000.

Make no mistake. The Vancouver real estate market is leveraged on cheap money and low interest rates.

Meaning... it's all about those rates.

Mark my words, if the variable rate rises to 8% (with double digit 5 year rates), Vancouver will make California's crash look like a dress rehersal.

I suspect Neuman's iconic famous motto isn't the mantra of the local mortgage carrying crowd.

==================

Email: village_whisperer@live.ca

Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.