Today the 'official' July 2010 real estate sales statistics were released for both Greater Vancouver and the Fraser Valley.
And as we posted on the weekend, the picture is not pretty.
How ugly is it, you ask?
“We didn’t anticipate this level of change,” said Deanna Horn, Fraser Valley Real Estate Board President.
Of course the inability of the Real Estate Boards to 'anticipate' is almost considered a joke on the real estate blogs,as this post over on VREAA illuminates.
As expected, the Greater Vancouver Residential Benchmark price is down for the third consecutive month:
April, 2010: $593,419 May, 2010: $590,662 June, 2010: $580,237 July, 2010: $577,074
Sales in July fell 45% from the same month last year, and prices have fallen 2.8% since peaking in April... not quite a 'crash' by any stretch of the imagination, but the endgame is clearly afoot.
According to the Real Estate Board of Greater Vancouver (REBGV) the supply of properties for sale has increased so significantly that the decline in sales now threatens to pull prices lower, with inventory levels 33% higher than this time last year.
In fact, the REBGV now calls Vancouver a “buyer’s market,” which seems odd because clearly people aren't buying.
Is this a temporary lull or the start of a significant drop in real estate values? That, of course, is the central question being debated by the R/E bulls and bears.
Once again I feel compelled to cast an eye towards Bob Rennie, Vancouver's anointed condo king.
His stunning marketing moves to slash prices by 40% in both the Okanagan and for condos in Vancouver at the luxury Fairfield Estates serve as a bellwether.
The market is changing and he is responding by attempting to stay ahead of the curve. Either Rennie is throwing away massive potential profits or he is facilitating significant reductions in advance of a bloodbath starting in earnest.
When the 'crash' starts with 40% reductions from the market's biggest player, the prognosis in Camp Rennie can't be very bright.
A good gambler knows when to hold... and when to fold.
And Rennie does not appear to be willing to up the ante.
More evidence that reality is somewhat divergent from the R/E 'spin'.
Faithful readers will recall that last month the R/E propaganda machine was attempting to calm jitters about a significant real estate turnaround.
You can't hide declining sales numbers, but panicking sellers were 'soothed' with news that 'Hot Asian Money' (HAM) was maintaining property values, particularly on the west side of the City of Vancouver.
Headlining this message on June 12th was our buddy Cameron Muir from the BC Real Estate Association who specifically talked about 'HAM' maintaining west side market values:Perhaps this reassurance would calm nervous buyers and keep them dashing into the market, a move which would support market prices?
Well, as we already know, the Real Estate Board of Greater Vancouver (REBGV) statistics for the month of June 2010 came out and the numbers didn't reflect Muir's appraisal of the situation..
On the west side of Vancouver, where all the supposed 'HAM' money was supporting real estate values, the benchmark price for detached homes dropped a significant $91,000 from May to June.
And now... in the middle of July... it appears the downward slide continues.
As noted on VREAA the above pictured house at 3540 West 40th Avenue provides a snapshot of what could be an accelerating collapse.
Promoted as an outstanding Dunbar character home in immaculate, move-in condition, this 3,359 square foot 4 bedroom, 2 bathroom home sits on a 6,700 square foot lot.
It was touted as having been maintained in pristine condition with a high basement ceiling and large unfinished area with great suite potential if needed. The home was originally listed for sale at $1.549,000 on June 7th, 2010.
Hot Asian Money didn't exactly rush in to trigger a bidding war.
Instead what we witnessed was something more akin to a seller desperate to move the property.
On June 12th, 2010 the asking price was reduced to $1.449,000 - a reduction of $100,000 in the blink of an eye 5 days after the property was originally listed!
And with no one jumping in on that, the seller obviously received an offer from a buyer sensing the desperation.
On July 6th, 2010 the home sold for $1,340,000, yet another $109,000 shaved off the latest asking price.
That's a total drop of $209,000 (or 13.5%) off the original asking price... a far cry from several months ago when bidding wars were triggering sales in a day after listing at well over asking pricse.
More significant in all of this are the background details of this sale.
This home had been held by the owner for over 40 years. At first blush you would conclude that the sale is no big deal because the owner could obviously come down significantly from their asking price and still make a huge profit.
Which is true. And that is very telling.
As we have talked about before, a chilling dynamic will be hitting real estate in Canada over the next 15 years.
The first wave of Boomers are hitting retirement age this year. Statistics show that over 70% of these Boomers do not have adequate funds set aside for retirement. Their whole retirement 'plan' lies in selling their home, downsizing, and using the left over money for their retirement years.
In this cases, holding out for 10 or 15 months to get that optimal 'asking price' is probably not an option... especially if fears of a declining market start to grip the general public.
I suspect you will start to see more of this; long-time west side owners listing their homes and then quickly and dramatically slashing their asking price in order to realize the sale.
The chilling fact is that anyone who bought in this area in March/April (at the top of the market) is suddenly $210,000 underwater from their purchase price. And if the benchmark price continues to plunge, other Boomers will fall over themselves as they drop their asking prices in a desperate attempt to close that sale. Remember, even at 50% off current asking prices, any real estate sale represents a stunning profit over what these owners paid 40 years ago. And as momentum builds, latter Boomers will be frantic to salvage what they can from their retirement 'plan'.
Fear.
For Boomers who have all their retirement plans wrapped up in the value of their house, it will become 'the' most significant motivating factor.
This particular home owner shaved almost 14% off their asking price when the home was only on the market for 1 month. Imagine what a wave of Boomers will do if their homes languish on the market for almost a year?
We will watch the next 12 months with keen interest.
Ahh... the credo of the eternal optomist as adopted to the real estate industry. You could walk into a house and be up to your knees in manure and a real estate agent would cheerfully tell you... "Gee, this place must come with a pony."
Once again the Real Estate pollyanna's shill about the return of good times, the underlying message the same as always... Don't be left out, you better buy now!
The latest is the Real Estate Board of Greater Vancouver telling us that the Greater Vancouver housing market "has entered a more moderate and balanced state," with sales and benchmark prices both up in April compared to March.
And don't kid yourself, the local real estate community is doing everything it can to whore values higher.
The industy is eagerly pointing at 3% mortgages and homes being up to 15% more affordable than they use to be. The carrot is dangled furiously at people who wanted to buy in the past, but could not. "Now," the pollyanna's proclaim, "they can."
As we have documented here in the past month the crucial first-time buyers are being relentlessly prodded into action.
The pollyanna's hook their prey and trumpet that the Federal government will let them raid $25,000 from their RRSPs, tax-free, to buy a home. The Feds will also donate $750 to help them close. Then real estate industry creates media releases about young buyers rushing into the market in this, perhaps the best (and last) time, to buy into the market.
Even the mighty CKNW, the radio station that bills itself as "BC's News Leader and the station you turn to in an emergency", has turned to pimping for the real estate industry. Surely you have heard the sickening PSA's that tell everyone that 'now is the time to buy'.
For shame. It's peer pressure at it's manipulative best.
And what about the real news? The economic winds are not blowing kindly.
The public service abounds with rumours of slumping revenues, pending cuts in spending, and a much bigger-than-budgeted deficit.
Watch for a new provincial budget on the heels of the BC Liberal election majority that cuts services, raises taxes and slashes funding to municipalities.
What is it they say? Shite rolls down hill? Municipalities will, in turn, cut services and raise - wait for it - property taxes. And the hikes will be significant.
All of this comes on the heels of yesterdays news that bankruptcies in B.C. are soaring and that heavy job losses are taking their toll on individual residents. B.C. has the dark distinction of having posted Canada's third-largest increase in consumer bankruptcies, behind Alberta's 99.8-per-cent increase and Newfoundland's 88.9-per-cent rise.
Mark my words, if the economy does not perform the Immaculate Resuscitation investors in the stock market are being hoodwinked into believing, all those being sucked into buying now are going to be very, very bitter.
Maybe they can console themselves as they hunt around their new house looking for the pony.
"Fear. Fear attracts the fearful... the strong... the weak... the innocent... the corrupt. Fear. Fear is my ally."
- Darth Maul Star Wars Ep. 1: The Phantom Menance
On March 3rd the Real Estate Board of Greater Vancouver (REBGV) put out it's monthly press release on sales.
Now, January and February have been dismal months for Greater Vancouver realtors. In fact, January was the slowest month is over 25 years with only 762 sales. February was better, but sales only totaled 1,480 - a decline of almost 50% from the year before.
So when over 9,700 members share 2,242 sales, it means REBGV realtors are on a pace to each see a commission cheque for one single housing sale once every 8 months.
Lean times indeed.
And what does the REBGV President, David Watt, have to say in his monthly press release to the media about the state of Real Estate in Vancouver?
He tries to use fear as a motivating tool to stimulate sales, of course.
"There are terrific opportunities out there right now, but with property listings continuing to decrease, those opportunities may be available only for a brief window of time”
Dave then goes on to warn, "Realtors are reporting more activity compared to recent months as people begin to see whether their position in the housing market has strengthened as a result of falling interest rates and improved affordability!”
In other words, buy now... quickly... before you miss out... buy now... opportunity is only here for a brief period of time. Buy now. Right now.
Fear.
It has been an effectively leveraged tactic in Greater Vancouver Real Estate sales throughout the housing boom.
But not everyone agrees with the approach.
Larry Yatkowsky, a Vancouver realtor, hosts his own website titled Yattermatters. Yatkowsky seperates himself from most Vancouver realtors by being upfront with clients and potential clients. In an industry that guards sales data like nuclear secrets, Yatkowsky is one of the few who regularly shares data with the public.
He regularly offers snapshots of sales activity on the westside neighbourhoods in which he specializes, snipits which detail sales completed, listings, price reductions... it's all freely shared on Yatkowsky's website.
I suspect Yatkowsky does not attempt to close deals with 'fear'.
And what does he think of his Professional Association's recent attempt at fearmongering? In a March 3rd, 2009 post he said:
"Upon reading [Watt's] latest missive in the REBGV’s February Stats report the stench of fear mongering remained as residue. Upsetting is that Dave crosses a line of credibility by adding 'but with property listings continuing to decrease, those opportunities may be available only for a brief window of time'. Really! Are there 14,543 buyers ready to buy every residential property in Vancouver today?... This and other prognostications espoused in the last months [release] resemble deposits of overheated crap."
Yatkowsky then goes on to say, "Some may consider this declaration overtly sensitive - they are entitled. The contention is that the Vancouver real estate consumer is worn and tired of having these ignoble pontifications pronounced by industry leaders... Admitted is that Dave’s statements mechanically are true. However, they are fat with the power of fear and it is that fat with which exception is taken!"
"The words 'for a brief window of time' implies a do or die, buy or cry mandate. They are words that instill fear’s chill in many families who struggle to buy their first home. That cold draft flows through them with torment at the thought of not being able to afford a home if they don’t buy right now."
"Geez Dave, give the Vancouver real estate consumer a break! The implication of your words is stink. The words exude a ’sad devotion’ to the ol’ ‘better buy now or you are going to lose your ass mantra’. It is a chant that is out of tune in this market place. Today’s consumers will not tolerate being frightened by ’sorcerer’s ways’! Instead they will choose other paths in their real estate acquisitions. They will find those with tempered wisdom, not those that obfuscate truth with worn incantations."
"Look around Dave - there are hundreds who did exactly that which you propose. Now, wishing they had never purchased real estate you have to ask, will those consumers ever believe in us again?"
“The Federal Reserve is now a government within a government. It is totally out of control. Congress doesn't control it. It's funded by the banks and we either have constitutional government or we don't."
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