Thurs Post #2: What is the real estate industry afraid of?

On Tuesday we linked to a post on the real estate discussion board Real Estate Talks, a site run by realtor Ozzie Jurock.

Jurock promotes the site in it's masthead as "a friendly, interactive exchange of information on all Real Estate related subjects."

This week that site did not seem quite so "friendly".

Stunning screen shots had been posted there from the statistical data bank of Vancouver's real estate board revealing average and median prices for several neighbourhoods in the suburb of Richmond.

After being on RET for almost a full day, we linked to the post.  Later Garth Turner's site did as well.

Shortly after this, RET wiped the info clean.

The information was so stunning because it provided an intriguing glimpse behind the deceptive curtain of the HPI,  the MLSLink® Housing Price Index. 

Each month the HPI is trotted out by the local real estate boards as a measurement of how the market is doing. But while the Industry was telling us the HPI had declined in neighbourhoods likeTerra Nova by a mere -4.6%, the average sales price in the past year for that area was actually down by -38%, while the median price had crashed -50.4%.

Those are shocking numbers.

In the Riverdale area of Richmond, the data dump on RET showed the average price last month was down -27.5% and the median lower by 28%. In Seafair, the average price was down by -34% and the median by -25%. Compare this with the Industry's published HPI for Riverdale (-9%) and for Seafair (-15%).

How can the public not feel they are being deceived?

So what is the HPI anyway?

As Garth Turner noted last September:

Vancouver’s real estate board is the home of the original Frankenumber, the MLSLink® Housing Price Index (HPI) composite benchmark price, blatantly intended to smooth out peaks and valleys, giving the impression of an eternally stable market. 

Critics charge that Home Price Index is designed specifically so that it does not give an accurate view of current pricing or reflect market momentum – elements critical to an informed home-buying decision.

Instead it’s there to mask those swings, obfuscate reality and create an ‘it’s-always-a-good-time-to-buy’ mentality. 

The HPI, as a statistic, is ridiculed as existing to help realtors sell houses - not help citizens know when to buy them. As such it is so complex and convoluted that it takes the Industry 25 pages to explain how it is calculated.

Those screen shots which appeared on RET are significant because they show that the real estate industry clearly values keeping track of average and median prices.  They even track these stats neighbourhood by neighbourhood.

Why?

Because they represent critical elements crucial to informed home buying/selling decisions and even realtors find access to that data to be valuable and important.

But those stats are off limits to the buying public.  They are secret, for realtors only. Presumably that's why RET yanked them.

In the meantime, are the real estate boards on a witch hunt to find out who released the information?

More importantly, why restrict the data?  What motivates the Real Estate boards to keep this from you?

Is it because for almost a year now, Real Estate sales in Vancouver have been tanking despite Industry attempts to berate buyers who are waiting for the market to collapse. Meanwhile burgeoning inventory is hitting all time highs, despite Industry jawboning that sellers won't be putting their properties on the market unless buyers are prepared to pay market value.

These trends are followed by reports today that headline: "Nearly a quarter of Vancouver’s condos are empty", and suggestions about that our market is frothing from the excesses of a speculative frenzy.

Is information repressed as part of an attempt to protect asset prices? It certainly looks that way.

If buyers read that median prices were crashing by -50% in the newspapers and on TV, do you think buyers would be eager to make transactions?

Yesterday we issued a challenge to realtors to come forth and release average and median price data so that the public could balance the publication of the Home Price Index (HPI) with data which, while imperfect,  provides buyers with a more accurate view of current prices and market momentum.

For as Garth Turner notes:

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.

Ideally the Real Estate Board of Greater Vancouver (REBGV) and the British Columbia Real Estate Association (BCREA) will make it a part of their monthly statements.

In the meantime I'm happy to report that one Vancouver Realtor is accepting that challenge.

Realtor Larry Yatkowsky is out tonight with a post on his blog titled: Median prices of Vancouver Houses.

If kept in perspective Median Prices can be useful information to anyone considering the sale or purchase of a Vancouver property. As is normal practice I bring to my clients all statistical information possible when discussing the sale or purchase of their home. It is also my normal practice that if such graphical information is not readily available as a service from my board I will based on their data, build it. Such is the case with this Median graph. Additionally, in the past while commentators have expressed an interest in having a Median Price graph for Vancouver properties. It seemed appropriate to share this with them. I hope it will serve all well in your Vancouver home selling or purchase deliberation.

Does your real estate salesperson offer this service? If not, you might wish to consider giving me a call when life moves you.

Caution: In the graph below you will find a Median Price graph that includes Vancouver West, Vancouver East, West Vancouver and North Vancouver – the four communities within my service area. Remember that the Median Price is merely another statistical tool to help you make a Vancouver home buying or selling decision. It is a starting point.

Now... anyone care to tell us how much those median prices for February 2013 are +/- from January 2013?

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The media discusses the August 2012 real estate numbers... lipstick anyone?

It seems there's no way to put lipstick on the horrid real estate statistics for the month of August.

If you didn't catch it, the lead story on CTV Vancouver news tonight is the slumping Vancouver real estate market. Unfortunately I can't embed the clip here but you can click on the link to see – CTV profiles how experts are beginning to wonder if Vancouver’s real estate bubble is going to burst"

Meanwhile the Financial Post headlines Vancouver home sales plunge, posting second-worst August since 1998.

How bad are the numbers?

As VanPro over on the blog Real Estate Talks notes the overall Months of Inventory (MOI) is approaching 11 months.

• August 2012 has now posted the second lowest sales totals in the last 15 years.
• When it comes to sales of Single Family Houses (SFH), there were only 75 sales on the West side of Vancouver in August 2012 (there were 995 available for sale). That's down a shocking 42.3% year-over-year!
• On the east side of Vancouver there were only 79 sales, down an even more shocking 46.6% year-over-year!!

As we said at the start of summer, the numbers from July and August were going to be fascinating to watch... and they were.

Normally listings drop of dramatically and sales slow. What we got was only a slight pull back in listings and sales plummeted. 

Prices in areas like Richmond, with homes that are actually selling, have begun dropping below assessed value. We are seeing sales activity pick up a bit as the price point has been reached for a few that are hovering (one of the signposts we look for as the market begins it's collapse).

A larger number of high end sales were completed last month (another of those signposts). But even here prices are dropping. A few days ago we provided you with stats of the high end sales in August up to August 22nd - one of them for just over $12 million. As the month came to a close, we now know there was a second $12 million sale. But these two properties started off with asking prices of $16 million and $14 million.

They say on the way down, prices are very, very sticky. But they are starting to move.

Normally listings really start to pick up in September and sales remain constant through September. With the current steady diet of bearish real estate news, the September surge in listings will be met with more dismal sales as the negative feedback loop picks up momentum.

We are currently sitting on an all time record streak of 16 consecutive days with daily sales totalling less than 100 per day - despite the fact that we just passed a three day weekend (when normally we see a bump in sales from the longer non-reporting weekend sales.

But the streak remains unbroken.

The real estate propaganda machine has been forced to finally declare our's a 'buyer's market'.

Problem is... no one wants to buy.

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Condo's, Coffee... and an ode from Ms. Hopkin

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A chilling turn of events for condo developers and a ray of hope for pre-sale buyers sewered by the market crash of 2008.

As reported in the Vancouver Sun, the B.C. Supreme Court has ruled that the pre-sale buyer of a UBC condo development is entitled to rescind the contract under the Real Estate Development Marketing Act because the developer failed to properly inform him of changes to the development. The section of law in question is one which requires that purchasers receive all amendments to the disclosure statement.

There are dozens of other cases currently before the courts from people who put deposits on condominium units when the market was red hot, and now, for various reasons, are trying to walk away from them.

I suspect that never in the history of real estate have so many disclosure statements been raked over with such a fine tooth comb nor developments so finitely inspected, as is now being done in British Columbia.

We will watch developments unfold with keen interest.

Meanwhile over on Real Estate Talks, one of the best R/E discussion boards around town, there has been an interesting banter about the spring bounce in the real estate market.

Sales volume is clearly up, driven by the government's desperate attempt to halt falling property values by slashing interest rates to historic lows.

Anecdotal evidence posted on the board suggests that many sellers are tapped out of equity in their properties that they are selling. Once sold, the outstanding mortgages held by the sellers are very close to the selling prices, ie…..no equity left. So, although there are a lot of first time buyers purchasing these properties, the Seller’s don’t have the equity to buy “up” or even buy “down” afterward.

In addition, it is being suggested that some investors who would love to sell, won’t sell because there is no profit on the table. They are underwater on the deals and are left bleeding money every month because they are paying a tenant to live in their investment for rents far below their own mortgage payments. One poster suggested that this negative cash flow each month is like a Chinese water torture for the property owners.

Despite such evidence, one RETalks contibutor (messageboard posting handle 'eyesthebye') is so convinced that the selling frenzy means Vancouver home prices will rise in 2009 that he is betting the naysayers on the board a beverage at Starbucks if he is wrong.

The measurement standard will be the MLS HPI, a concept modeled after the Consumer Price Index. The HPI is touted by MLS as an alternative measure of real estate prices that provides a clearer picture of market trends over traditional tools such as mean or median average prices.

The specific bet will use the January, 2009 HPI numbers for Greater Vancouver Detached Homes (194.8) and for East Vancouver Detached Homes (200.6). 'eyesthebye' states these numbers will be higher at the end of the year.

Clearly 'eyesthebye' is one of those who thinks that the notion that Vancouver is in a housing bubble is pure nonsense. He has even posted that Vancouver 'is different' from other cities and suggests that we are immune here.

I'll keep you posted on the results.

That anyone refutes the fact we are in a bubble that is bursting continues to amaze me. Yet 'eyesthebye' is clearly one who thinks it can go on and on and on.

Reminds me of the lyrics from the song,

Through the door there came familiar laugher,
I saw your face and heard you call my name.
Oh my friend we're older but no wiser,
for in our hearts our dreams are still the same...



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