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.
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.
UPDATE: The data in Richmond Realtor Shuchat's post is about Vancouver, not Richmond, as originally posted on this blog. The reference to Richmond has been removed (hat tip A. Shuchat).
Local Richmond realtor, Arnold Shuchat, is out with his latest market analysis and he declares the Vancouver market has turned. Now it's a seller's market:
If one wanted a weather vane to see where the real estate market winds are blowing, this would be as close to it as one could get. I designed the Seller's Delusion Index to track sellers' frustration over time, with the hypotheses being that the more expired and terminated listings there are as a ratio to sales, the greater the downward pressure on real estate prices. A seller has two options: cut his price or take it off the market. One results in a sale and the other a terminated listing.
As an historical measure, (Terminated + Expired listings) divided by number of sales in or about February of 2011 an accepted market high point, were running close to historic lows of about 27% depending on property type. At the worst recent time since then, they were running around 244%. That is akin to saying that when things are "hot" sellers had a 1 in 3 chance of being frustrated, whereas when things cooled down, they were 9 times more likely to be frustrated.
As one can see from the chart below, sellers' expectation are being more fully met now and the trend is leaning towards a seller's market once again. This table supercedes all previous ones as the sufficient time lapse following the months' end assures a more accurate set of numbers to allow for complete reporting of sales, terminated and expired listings.
Hopefully a turning market will keep this real estate agent busy enough so that he doesn't have time to do any more video's…
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.
Recently we have profiled a few contributions from 'Alphabet Arnie', aka Richmond real estate agent Arnold Shuchat.
Shuchat has made a number of bullish statements recently, but what you have to admire is that he does tell it like it is when talking about specific market conditions on his blog.
Terra Nova is like a microcosm for Richmond Real Estate. And Richmond real estate is a microcosm for immigration. If Terra Nova is doing well, then Richmond will do well. So here is a snapshot of Terra Nova Real Estate over the last couple of weeks; and it isn't great.
Says it all right there.
You can see the full update on Terra Nova at the link above.
Meanwhile Rick Mercer and the Mercer Report comment on the housing market in a skit that says it all in only 77 seconds.
#204-3411 Springfield Drive, a foreclosure sale in Richmond, had dramatically dropped it's asking price.
Listed as a spacious 3 bedroom, 2 bath, end unit condo overlooking the courtyard, it has languished on the market since May.
Assessment value: $265,900.
The asking price two weeks ago?: $185,000... 30% below assessed value.
Last Thursday another $45,100 had been chopped off that asking price and was now listed for $139,900
(click on image to enlarge):
That's $126,000 below assessed value or 47% under assessed value.
In the comments section we were urged not to get excited because this was a marketing strategy. Wait until the offers came into court and then see what happens. (the argument being a bidding war in court would push the value up significantly from that 47% below assessed value listing price).
Well... #204-3411 Springfield Drive has posted at sale now (hat tip: bopeep @ Vancouver Price Drop).
No bidding war, though.
It sold for $135,000.
That's $4,900 below the last listing price and a full -50% BELOW assessed value.
Good thing we waited to see what would happen in court because now we know that Richmond has officially recorded a sale of a property at -50% below assessed value. For those who complain that these dramatic drops only represent the 'shit properties' (as one contributor observed yesterday), foreclosure court in Richmond has another sale on Monday. This is #135-8880 Jones Road in Richmond.
The listing describes the property this way:
North-West corner large one bedroom with windows on 2 sides. Huge sundrenched 300 sq ft patio, gas fireplace, insuite laundry. Less than 10 steps to elevator & courtyard. Central location, just 5 blocks away from bus stop & 2 blocks from shopping mall. PCDS dates October 26, 2012. Parking stall #220, 2 small pets (cats or dogs) allowed. Rentals restricted to 15 currently at maximum. Priced over $50,000 below city assessed value for immediate sale.
#135-8880 Jones Road is assessed at $249,000.
It posted a sale in foreclosure court on Monday for $195,000 ($5,000 below the listing price, a listing price which was $50,000 below assessed value).
Was the low asking price part of a strategy? If so, there were no bidding wars in foreclosure court on this property either.
Now this sale price is only -22% under assessed value. Buy think about that for a moment. Only -22% under assessed value?
Let's recall that it wasn't even 12 months ago we were telling you about properties in Richmond engrossed in bidding wars and selling for $200,000 - $300,000 over asking prices (which in themselves were hundreds of thousands over assessed value).
#135-8880 Jones Road is the new reality. As bopeep reminds us, this condo sold in 2007 for $215,000.
This condo may have "only" sold for 22% below assessed value, but it sold for $20,000 less than what the condo exchanged hands for in 2007.
That's five years of so-called real estate appreciation wiped out in a heartbeat. The seller LOST $20,000 in the actual transaction, not to mention five years of condo fees, interest on mortgage, realtor transaction fees and lost income by not investing elsewhere.
Been a busy weekend, so a quick late night Sunday post for you.
It's midway through the month of November and we have some nteresting statistics from yet another Richmond real estate agent, Arnold Shurchat:
Over the last week in Richmond, there has been 75 new listings for real estate for sale, 74 price changes and 28 sold properties. All 74 prices changes were declines. The total number of listings for both detached singled family homes, condos and townhouses was 2,252 excluding multi-family units. In essence then, excluding new listings that keep hitting the market, it wold take almost 1.5 years to sell just what is out there right now for sale, at the rate things were last week. It is still definitely a buyer's market.
1.5 years of inventory for all real estate in Richmond right now and 74 price changes last week, all of which were declines.
In short... those that hoped the increase in sales in October over September were a sign the market was improving are about to be sorely disappointed. It's shaping up to be another brutal month in Richmond.
Richmond realtor James Wong takes a look at the evolving market conditions and comes to the stunning conclusion (for a realtor) that there are "strong signs for a prolonged market downturn." It has Wong asking, Are We Headed For a Housing Market Downturn?
Wong takes a look at the last downturn our market suffered and makes the following observations:
The last real estate cycle started around 1985 to reach a peak around 1994. It was a good 10 years run where average detached home prices in Greater Vancouver was just around $100,000. At it’s peak, home prices were at just over $420,000. The correction that took place was mild, reaching the bottom in 1998 with average price hovering around $360,000.
There were around 1,030 detached homes listed for sale with average monthly sale around 80 units. The months of inventory (MOI) recorded then was 12.9 months. The current supply/demand ratio for detached homes in Richmond is much worse than the beginning of the downturn in 1995.
Wong then looks at the current boom:
The run up in detached home prices in Greater Vancouver from 2001 took another 10 years, rising from around $380,000 to about $1,300,000 at it’s peak in 2011. The increase in average home prices in Greater Vancouver during this period was around 3.5 times. Housing affordability started to become an issue as early as 2005. Declining sales since 2006 was the first sign of the crack in the housing market in Greater Vancouver.
Wong then takes a stab at predicting where things might be going. He plots a “reverse image” of the Greater Vancouver price chart (with home price topping around March 2011). He yypothesizes how a down cycle for real estate might play out, including the duration and the extend of price decline that could happen the next few years (click on image to enlarge).
Wong's chart forecasts the average price dropping from over $1.1 million to the high $300,000's by 2020.
A drop of over 70%.
Wong then makes a stunning analysis for a realtor. First he recognizes that the market should have strongly corrected in 2006 but didn't for the following reasons:
In spite of many new homes being added to the market each year, sales decline since 2006 was an ominous sign the housing market is ripe for a fall. Strong buying interest from Chinese from mainland China, easy credit and irrational market sentiment continued to drive home prices higher until 2011.
Then he summarizes EXACTLY what is going on:
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 $280,000.
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 values. The rush to exit the market will take its toll on sellers who bought their homes recently.
Wong has concluded the crash is underway and that values are going to drop dramatically to the point where owning a home makes fiscal sense again.
As you read the various real estate board press releases that have come out this month, the consistent theme has been 'sales are down, but prices holding firm.'
But if you read this blog on a regular basis, you know that simply isn't true in the Vancouver suburb of Richmond, a community that was once the darling of HAM (Hot Asian Money).
That was the Richmond house assessed at $1,010,000, had it's listing price reduced several times until it reached $799,000, and then finally sold for $765,000.
Richmond realtors have been telling you for months now that if you want to sell in Richmond, you must not only list your property below the current assessed value - but you must aggressively price it as much as 15% less than what other listings are going for if you hope to sell.
And lest you think 7920 Shackleton Drive was a one-off example, let me introduce you to 3900 Francis Road (pictured above).
This 3 bedroom, 3600 square foot home with an attached two car garage is assessed at $1,020,000.
The property was listed for sale for $988,000.
On September 29th, 2012 this craigslist ad appeared (click on image to enlarge):
Proclaiming that their new asking price of $898,000 (for a house with an assessed value of $1,020,000) was a price that had just been reduced by $90,000; the property is promoted as the 3rd lowest of 37 properties available in the Seafair neighbourhood in Richmond.
Such a deal, eh?
Apparently, though, that wasn't enough.
Because today 3900 Francis Road has an even newer reduced price.
Yep... merely a week later and another $99,000 has been slashed from the asking price.
So here you have yet another $1 million Richmond home which will probably sell - if at all - for around $750,000... or maybe even less, now.
In Richmond it appears the new reality is that homes assessed at $1 million can only reasonably be expected to fetch you $750,000 today.
What will it be like in a few months?
I wonder how many will have the foresight to get out while they can?
In our last post we brought you Richmond realtor James Wong's September Real Estate Market Report.
Wong told us that:
The lack of buying activities and large number of listings continues to exert pressure on home sellers to cut their prices in order to sell their homes. There are many more homes listed at or below their city assessment values. Homes that were sold were ones that aggressively cut their prices, or were sold by sellers who accepted low-ball offers.
Chilling news.
And if you had any doubts about the accuracy of Wong's take on conditions, one has only to look at recent Richmond real estate transactions for confirmation.
Transactions like this one.
This is 7920 Shackleton Drive in Richmond which sold this past week (click on images to enlarge).
Billed as a 4 bedroom, 2.5 bathroom, family home, it's 2000 sq ft plus floor plan was hailed as spacious and well kept. High vaulted ceilings in the living room, double car garage, good sized east facing backyard and it's location close to Richmond dyke's were all contributors to a property assessment by the BC Assessment Authority as a million dollar home.
Assessed value of $1,010,000 to be exact.
And how did this million dollar home fair in a milieu Realtor James Wong described as so dire that "the only way out of this market is to cut prices… not just 5%, but with much deeper cuts of 10% to 15%?"
Exactly as he described.
Instead of asking above assessed value, the sellers recent ask price didn't even come close to assessment value.
Here you can see this single family home being flogged for $849,000:
And with that discount not working, the asking price was slashed again... this time to $799,000.
As we said, 7920 Shackleton Drive sold this past week.
We are told the final price was $765,000 (hat tip VMD and gokou3 on VCI).
From an assessed value of $1,010,000 down to $765,000.
In the words of James Wong, "A real estate down cycle is already in motion. Even a small percentage of these sellers having to slash prices to sell will result in prices cascading downward. Early sellers would consider themselves the smart ones, cashing out long before others."
That cascade has now begun.
The only question now is - how many will be smart enough to cash out before the crash begins to pick up speed in earnest?
The seller of this million dollar home might get $750,000 now... but in a few months they might well be lucky if they fetch much more than $650,000.
It's all a question of how quick sellers will stampede for the exits? For in this game... holding out might mean you might only be able to get $550,000 by next Summer.
Richmond, once the darling of the Hot Asian Money (HAM) crowd now seems to be ground zero the for the real estate crash in the Lower Mainland.
Richmond Realtor James Wong is out with his September 2012 report on sales in Richmond and it seems to get worse with each passing month.
Wong's September Report offers a veritable cornucopia of quotes...
August home sales in Richmond turned out to be worst than in July and the month before in June. The number of homes sold for the month was 179 which was 17% lower than the previous month sales of 216 homes. Active listings for detached homes, townhomes and condos/apartments in Richmond at the end of July, 2012 totalled 2,677 units, was marginally lower than the previous month’s listings at 2,700 homes.
August was another disappointment for many home sellers who were hopeful of selling their homes. Homes that were sold were mostly found to have aggressively cut their prices, or sellers accepting low-ball offers.
The real estate market in Richmond deteriorated further in August. The supply of homes in Richmond reached 12.51 months compared to the previous month of 11.02 months of supply. The lack of buying activities and large number of listings continued to exert pressure on home sellers to cut their prices in order to sell their homes. There are many more homes listed at or below their city assessment values.
There are no signs of the market in Richmond getting better. With the onset of the seasonally slower months in the fall, it is unlikely the last 3 months of 2012 will bring any relief to home sellers who are desperate to sell. Many homes that were priced according to the market, failed to generate much interest from buyers. Many of the homes that were sold were homes that offer better values, or priced significantly lower than comparable sales in the past 3 months.
Market sentiment is now working to reverse the gains in home prices. Condo prices in Richmond had stagnant for more than two years. Similarly, townhome prices remained at about the same level a year ago. For sellers who have to sell, the only way out is to cut prices… not just 5%, a much deeper cut of 10% to 15% is required.
A prolonged period of low sales, and declining home prices could take many years to play out. Declining home prices will erode seller confidence, resulting in more motivated home sellers to cut prices to sell before home prices drop further.
A real estate down cycle is already in motion, and just like from 1995 to 2001, the real estate market in Richmond will have a persistent high level or homes for sale, and few buyers willing or able to buy due to tighter lending rules.
Richmond detached homes over $1,000,000 are not seeing much buying interest. With total active listings of 721 and average sale around 26 homes the past 3 months, there are 26 months supply of homes. For detached homes over $1,500,000, there are currently 366 homes for sale. With an average past 3 months sale of 12 homes, this translates into 30 months supply of homes.
Even a small percentage of these sellers having to slash prices to sell, it will result in prices cascading downward. Early sellers would consider themselves the smart ones, cashing out long before others!
Mr. Wong was the first of a growing legion of realtors we profiled in the Greater Vancouver area who have been telling you that if you want to sell "deep price cuts are needed."
He's out with his latest monthly report and comes to a conclusion that should send a chill down the back of any Richmond homeowner looking (or planning) to sell.
"In Richmond, there is a high probability of a price decline for detached homes in excess of 30%."
Wong sees the events over the next few months following the pattern we saw in 2008/2009. But, instead of a recovery like 2009, Wong thinks sales will stay at their current dismal rates with home prices declining even more.
As that happens, Wong finally connects the dots to paint the picture we know all too well is coming:
"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 momentum will pick up when more sellers realize that a real estate downturn is in motion."
And by then, of course, it will be too late.
The writing is on the wall. More from Wong:
"The cascading effect of declining home prices will snowball, causing more home sellers to sell before home prices drop further... The in-balance in supply and demand is massive for million dollar homes in Richmond. A price collapse in Richmond detached homes looks inevitable!"
That imbalance Wong speaks of is epic.
There are a total of 722 listings in Richmond right now for homes over $1,000,000. With average sale around 27 homes the past 2 months, there are 27 months supply of homes.
For detached homes over $1,500,000, the past 2 month’s sale averaging 11 units against 361 listings. This translates into a staggering 33 months supply of homes.
As prices implode on the million dollar homes in Richmond, sub-million dollar homes will be dragged down accordingly.
And as Richmond collapses, the contagion will spread quickly around the Lower Mainland.
July home sales in Richmond turned out to be worst than in June and the month before in May. The number of homes sold for the month was 216 which was 13% lower than the previous month sales of 248 homes. Active listings for detached homes, townhomes and condos/apartments in Richmond at the end of July, 2012 totalled 2,700 units, just 30 units shy of the previous month high of 2,730. Home sellers are faced with a dilemma, cutting prices more aggressively to sell or to take their properties off the market.
The real estate market in Richmond deteriorated further at the end of July. The supply of homes now reached 11.02 months compared to the previous month of 9.93 months of supply. The higher ratio was due to lower average sales, although the total listings were around the same level as the month before. Some home sellers were making drastic price reductions and generous concessions in selling their homes. More homes were now listed and sold at prices significantly below their city assessment values for 2012.
Richmond real estate market outlook
The next few months are expected to remain lacklustre. The next few weeks and months would probably follow what happened in 2008. But, instead of a recovery like 2009, home sales could stayed low at current level with home prices declining. In Richmond, there is a high probability of a price decline for detached homes in excess of 30%, and attached homes in the range of 20% or more over the next 3 years.
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.
Richmond detached homes over $1,000,000 are not seeing much buying interest. With total listings of 722 and average sale around 27 homes the past 2 months, there are 27 months supply of homes. For detached homes over $1,500,000, the past 2 month’s sale averaging 11 units against 361 listings, translates into 33 months supply of homes. The in-balance in supply and demand is massive million dollar homes in Richmond. A price collapse in Richmond detached homes looks inevitable!
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 momentum will pick up when more sellers realize that a real estate downturn is in motion. This could take a few years for home prices in Richmond to reach a more sensible level.
The smart Richmond Boomer is making that minimum 30% price cut right now.
Because, as Wong says, when "sellers realize that a real estate downturn is in motion" - a 30% reduction in asking price won't even begin to attract interest. "The cascading effect of declining home prices will snowball, causing more home sellers to sell before home prices drop further."
Mr. Wong is a realtor in Richmond who publishes a monthly report on the health of the market.
On June 16th, before huge mortgage rule changes were announced by Federal Finance Minister Flaherty cutting million dollar homes off from CMHC high ratio mortgage insurance, Wong came out with this report for Richmond real estate.
Richmond’s total home sales for May, 20, 2012 at 271 units was 11% lower than the previous month sales of 306 homes.
The total number of detached homes, townhomes and condos/apartments listed for sale at the end of May at 2,680 units was 6% higher than the previous month’s total of 2,525.
The total active listings for the 3 types of homes in Richmond now surpassed the highest listings registered in September, 2008.
The supply of homes in Richmond at the end of May at 9.08 months edged higher compared to the previous month’s figure at 8.07 months of inventory. The supply of detached homes, townhomes and condos increased further in the month as more listings were put on the market. Overall, the housing market in Richmond is in favour of BUYERS, with a great selection of homes to choose from.
Daily price reductions are common as sellers adjust their selling prices to try to sell their homes.
Richmond real estate market outlook
Both the condo and detached homes markets are facing some challenges. Resale condos have to compete with presale and new homes that are competing for buyers.
Similarly, detached homes are having a tougher time to attract home buyers especially for detached homes that are over $900,000.
Homes over $1,300,000 and new homes that are over $1.80 million are not selling well.With current level of supply, price erosion is evident when more sellers are reducing their prices, and transaction prices are trending down.
Homes under $900,000 in Richmond and those priced realistically are getting more showing activities
There are 566 homes over $1,200,000 listed for sale in Richmond. With past 3 months average sale of 32 units, there are now 17.7 months supply of homes.
The slow sale pace will result in home sellers either taking their homes off the market, or allowing them to go expired unsold.
Some seller’s who must sell will have to resort to much deeper price cut to sell their homes.
Did you catch that?
For the 566 homes priced over $1,200,000 it is expected you will have to wait 17.7 months to sell.
And if you are in a position where you have to sell, you will "have to resort to much deeper price cuts to sell your home!"
And this rosy analysis, which comes from a realtor, came out before Flaherty cut all of these homes off from CMHC high ratio insurance eligibility.
Reports over the summer and into the fall from Mr. Wong should be interesting.
Perhaps even more interesting will be watching to see what sort of price cuts will be required if current conditions intensify.
As we watch available real estate inventory surge to just under 19,000 properties for sale in the Vancouver market, it has many anticipating that the long awaited correction may finally be coming to the Village on the Edge of the Rainforest.
Sales have been slumping dramatically. HAM (Hot Asian Money) has been a no-show in the Spring market, and Inventory levels are surging - almost double from where they were five short months ago.
But as we have cautioned numerous times before... don't assume. Watch and see what happens.
Recall that a while back we talked about several triggers which could implode the market. There is the China Trigger, The Speculator Trigger and The Boomer Trigger.
The China Trigger may start the ball rolling, but I think the Speculator Trigger and the Boomer Trigger will be the ones that create the sheer panic which will lead to wholesale price liquidation... particularly the Boomer Trigger.
By now faithful readers are well aware that the majority of the self-indulgent Boomer generation have failed to prepare for their senior years.
Seven out of 10 Boomers do not have enough money set aside for retirement. And since 2011 marked the beginning of the great Boomer transition into retirement, this financial planning statistic is significant.
Starting in 1946, the demographic Post-World War II baby boom began. And the Boomers at the front of this wave have benefitted most from seemingly everything.
After having been raised in the post-war affluence of the 1950s and 1960s, the first wave of boomers entered their mid 20's starting in 1971. As they settled down between 1971 and 1976, these first Boomers bought homes which sold for between $40,000 and $60,000 in suburb communities like Richmond.
Now, as these Boomers head into retirement without adequate funding to carry them through their golden years, the vast majority have a very simple retirement plan: sell their bubble inflated asset of a house, downsize and live off the proceeds.
A average house on a large lot bought in 1971-1976 in Richmond for between $40,000 - $60,000 is now 'worth' between $1.0 - $2.5 million dollars.
Enter the Boomer Trigger... trigger the sale of the one significant asset Boomer's have to fund their retirement. At the same time, if the market slows, Boomers can use their original purchase price advantage to under cut other sellers in a collapsing market - a maneuver which has the potential to crash the market if done by a large number of Boomers at the same time.
Well, as we have noted for most of the past six months, the sales of single family houses in Richmond has been coming to a slow crawl. Inventory is at all time highs.
And today I have another example of a Boomer who may have pulled the Boomer Trigger to undercut other sellers in a stagnating/collapsing market.
Allow me to draw your attention to this typical 1970s house which can be best described as a 'tear-down'.
It's address is 6840 Coltsfoot Drive (near Granville and No. 1 Road).
Billed as "4 bdrm plus den 2 1/2 bath home in great area, perfect to live in now and redevelop later", the house was constructed in 1973 and it is a 1,992 square foot home sitting on a 7,385 square foot lot - perfect for the speculator redeveloper.
Throughout 2010 and the start of 2011 these properties were the hottest thing going in what was known as HAM central - the Vancouver suburb of Richmond.
It came to market at the start of 2012 with an 'assessed value' of about $1.1 million.
But 2012 isn't 2010 or the start of 2011.
Recognizing that the Richmond real estate market was already stagnating, the owners of 6840 Coltsfoot Drive listed their home for sale on January 16th for only $968,000...
That's right, the original asking price was below assessed value!
What a deal, eh?
Last year, speculators would have launched into a furious bidding war to seize on this opportunity.
This year? Nothing... nada.
It has sat on the market for months now.
Recently the owners of 6840 Coltsfoot Drive cut their asking price to $868,000 (click on image to enlarge a screenshot of the reduced listing - hat tip ZRH2YVR):
6840 Coltsfoot Drive recently sold... for $800,000.
That's right. Assessed at almost $1.1 million. Listed for $968,000. Asking price cut to $868,000. And it just recently sold for only $800,000.
Is this the sign of what's to come?
And what of the Boomer next door or down the Street?
Last year compatible homes were selling in Richmond for $300,000 - $400,000 over the asking price.
Those bidding war prices, along with the original asking prices, were way above assessed value.
Smart Boomers (those who are wise enough to see what is happening) are pulling the Boomer Trigger and selling for whatever they can get.
As a Boomer do I dump mine too? Or do a wait to see if the market recovers?.. only to discover a market that continues to stagnate as inventory hits 22,000 or 23,000. If I wait... will the only offers coming in at that point be for $650,000?
It's a falling market right now. And as homeowners begin to realize their current 'assumed value' is evaporating, will more Boomers start to panic like the ones at 6840 Coltsfoot Drive?
We shall see.
Clearly the pressures of the market are starting to wear on some sellers.
And price cuts are happening everywhere, even the west side of the City of Vancouver.
As noted on the blog, Real Estate Talks (hat tip Makaya), there were 9 price changes on the west side on Friday, all decreases:
4460 West 6th was $2,748,000, new price $2,640,000 (–$108,000)
3760 West 17th was $1,698,000, new price $1,598,000 (–$100,000)
160 West 59th was $1,350,000, new price $1,280,000 (-$70,000)
475 West 38th was $2,990,000, new price $2,780,000 (-$210.000)
5637 Baillie was $2,348,000, new price $2,331,000 (-$17,000)
4452 Crown was $2,680,000, new price $2,550,000 (–$130,000)
1816 McNicoll was $2,498,000, new price $2,350,000 (-$148,000)
5276 Blenheim was $3,388,000, new price $2,998,000 (–$390,000)
3348/3352 West 3rd was $2,198,000, new price $1,988,000 (–$210,000)
This is from ONE day only.
Every single day we are seeing between 150-200 price changes in the Graeter Vancouver market.
If you bought one of the 9 places listed above last year with a minimum of 5% down, you are seriously underwater today.
And just think... these homes will sell for much less than what is currently being asked for.
Make no mistake... many of these houses were originally listed with prices that were too high to begin with. But last year they would be snapped up without a second thought... part of a surging market.
The market surge is gone.
To those sellers who recognize this, they are jumping on the chance to sell to anyone who is interested even if it means accepting offers significantly below assessed value.
Sellers not attuned to this dynamic are simply cutting their asking price to somewhere just above assessed value, or not at all.
And what of those out there - naively unaware of the current market dynamics - currently looking to buy a house.
Could it be that there are some house horny young couples out there who can be induced into the market in the next few months?
I can't imagine anyone doing so, but you know there are some foolishly itching to exercise a recent mortgage approval; a move that will trap them in what is increasingly a falling market.
They will think they are getting a good deal.
Their realtor will say "it's a great time to buy" (translation: "it's a great time for me to make a commission.")
They will rationalize their deep desire to own their own home and it will overwhelm the common sense of all the mainstream media articles out there right now warning of a looming housing collapse.
But these buyers will be catching a falling knife... and making the most disastrous financial decision of their lives.
What else can you do but point out the emerging trend and hope they see the reason behind your cautionary words?
For everything there is a season... and buying right now is 'out-of-season'.
Faithful readers will recall posts we made at the end of March about the Marine Gateway development in south Vancouver.
It garnered notoriety as the first pre-sale condo sellout in Vancouver in over six years... an odd occurrence considering the slowing market conditions.
Even stranger was the fact that media reports documented less than 150 people in line for the sellout of 415 units in four hours.
It prompted us to wonder aloud if the Marine Gateway development hadn't fallen prey to the common industry practice whereby the marketer responsible for hawking the development strikes a deal with realtors who want to be exclusive agents to sell in the complex. These realtors often have to pick up 5 to 10% of those options each. Once the complex is finished and all the developers suites are sold, then these realtors can sell theirs.
It means that these exclusive agents could actually be responsible for buying up to half of the pre-sales condos made available to the general public.
Did this occur at Marine Gateway?
Is this how an estimated 130 people in line triggered a sell out of 415 units in a record four hours? Was it because these exclusive real estate agents secured half of the units (and the best ones at that... those which came with some of the limited parking spots and are the best candidates for future resale)?
Is this why, as noted on Global TV, those buyers who did actually line up early were disappointed they could only secure 1 bedroom condo units, units that were part of the contingent that came without an available parking spot?
The Marine Gateway sellout generated much needed R/E hype for the 'developments on rapid transit line' theme.
As we noted, Rennie Marketing Systems was launching a whole new theme which shifted the mantra of "location, location, location" to one of "transportation, transportation, transportation."
We observed that in the months ahead, Rennie would be expanding on this theme as he went to market with 3 more developments along the rapid transit system:
A pre-sale of 300 units he will launched next month at another Canada Line Station - Brighouse Station in Richmond,
a pre-sale of 230 units he will launch in September at Coquitlam Centre on the new Evergreen Line line .
And a month after that 1,100 units, two towers, will go to market along the original Skytrain line in Vancouver at Joyce Road.
Well fast forward over a month.
The first of those upcoming developments, the pre-sale of 300 units at another Canada Line Station - a development known as Mandarin Residences, has come and gone... with little fanfare.
According to the title page on their website (click on image to enlarge) only 203 of the 300 units pre-sold on opening weekend... a far cry from the instant sellout at Marine Gateway:
I wonder how many of those 203 'sold' units were assigned to the exclusive realtors at Mandarin Residences?
If half of the 300 units went to realtors (150 units), could it be that less than 50 units actually sold to buyer's/investors?
Is this why Global TV wasn't invited to cover that pre-sale?
I raise this question because if as few as only 50/300 units actually sold, then it would be desperation time with those 'exclusive realtors'.
And just how desperate might they be?
Would they be so desperate to as to beat the bushes of the internet to shill their condo in the comments section of a bear blog such as this one?
May I draw you attention to a comment made today as part of a recent Richmond post on this blog (click on image to enlarge):
The comment links to the website of the Mandarin Residences.
Normally I delete shill comments which link to this product or that one. But this one I'll leave up.
Take a wiff of it and remember the smell.
I'm pretty sure THAT's what desperation smells like.
Was it only January 2011 when we were comparing the red hot real estate market in the Vancouver suburb of Richmond to Holland's historic Tulip Mania?
Then came the Tsunami in Japan and as we predicted, Richmond was about to undergo a massive Paradigm shift.
Richmond has gone from a sellers market to a market where inventory is building up in a massive way.
In fact it was that growing inventory that prompted one seller we profiled to accept an offer almost $1 million lower than his asking price (an amount which was 40% less than that original asking price) in order to sell in that stagnating market.
And make no mistake, Richmond is stagnating.
As VREAA noted two days ago, Richmond inventory has hit all time highs. Richmond detached home inventory is now over 1,021 homes available for sale.
It's been a deadly combination... increasing inventory and sales which have continued to tank month after month.
According to Richmond Realtor James Wong, the total number of homes sold in March, 2012 came in at a paltry 309 units, a drop of 5% from the total number of sales in February (324).
The total number of detached homes, townhomes and condos/apartments listed for sale at the end of the month totaled 2,330 units, an increase of 11% from February's total inventory of 2,100.
Wong pointed out the silver lining when he noted that the supply of homes in Richmond at the end of March resulted in an Months of Inventory total of 8.24 months, a slight decrease compared with the previous months figure at 8.82 months of inventory.
But the problem is that the overall supply of detached homes, townhomes and condos increased those listings overwhelmed the increase in sales.
And while Wong tries to spin the positive on the news at the end of his report, bear blog followers pass on a different story entirely.
VMD tells us:
“There are more and more people over at the Chinese [internet] forums reporting price drops in their neighborhoods (be it Richmond condos or Coquitlam SFHs). More people are voicing their skepticism that Vancouver RE market will continue to go up. Many already accept the view that Van RE price will decline at least a couple % this year.
People are noticing the glut of thousands of upcoming Richmond condo units, and are advising against buying at this time. A few people are saying their close/trustworthy Chinese Realtor friends are saying the RE market isn’t looking good; however the other Realtors (whom they’re not close to) are still trying to paint a rosy picture.
Sentiment is changing, even among the HAM.”
Of course don't let all these 'facts' get in the way of believing in the future of the real estate in Richmond.
And naturally it's the Vancouver Sun who leads the cheerleading charge.
So here, for your entertainment purposes, are the Vancouver Sun's top 24 reasons Richmond real estate is 'booming':
ASIAN INVESTMENT: With a mountain of money trying to get out of Hong Kong and china in expectation of economic collapse, the stability of Richmond real estate has drawn many investors to purchase property sight unseen. Reports of tour buses being taken from property to property, and strangers offering briefcases filled with money at the door are no longer uncommon.
SPORTS FACILITIES: Richmond has invested in all-weather sports facilities at a variety of local parks, as well as the much-hyped Richmond Olympic Oval, which hosts a wide array of sporting events, both amateur and professional.
SALMON: If you like fresh salmon, being able to walk down to the fishing boats and buy it fresh out of the water is a big plus.
BEDROOM COMMUNITIES: While Richmond has a reputation as an Asia-centric area, there are a growing number of communities that are entities all to themselves. The cultural contrast between Richmond Centre and Steveston couldn't be any starker, #5 Road's 'highway to heaven' presents a community of different communities, there are Ukrainian enclaves, Asian suburbs, spillover New West suburbs, and a growing number of young urban professionals around the Canada Line. The River Green development by the Olympic Village will be a small city of its own when it's completed.
SUMMER FUN: On summer weekends, thousands of people invade Richmond to take part in events, amateur sports, walk the docks and buy fresh fish.
FOOD SECURITY: Richmond is the last place in Metro Vancouver where food is locally grown in commercial quantities.
PLENTY OF DEVELOPMENT: Richmond's city council has a reputation for being developer-friendly, recently having allowed the construction of B.C.'s first wood-constructed six storey apartment building, which was consumed by fire before it could be completed.
THE DAILY MASSEY TUNNEL JAM: While home prices in nearby areas such as Ladner and Delta are comparably inexpensive, the dependence of commuters on having to make it through the Massey Tunnel during peak hour is a big turn-off for many.
THRIVING ARTS SCENE: From the often-photographed derelict houseboats of Finn Slough to the gigantic heads on display at Lansdowne Centre as part of the recent Biennale, to movies on the beach at Gary Point, to packed houses at the Gateway Theatrem Richmond has formed a growing local arts scene that fees the cultural needs of locals and immigrants alike.
GEOGRAPHY: The simple fact of it is that nobody is producing new land in the city of Vancouver. The only way to build is up, which means there's a high spillover into areas like Richmond. With Surrey and Burnaby still fighting the stigma of being seen as working class cities, Richmond's increasingly big money has helped it shed the tag of an immigrant town.
FOOD! Lovers of fine food have a lot of munchie options in Richmond, from some of the best Chinese restaurants in the world to hip new modern eateries.
LOW PETTY CRIME/HOMELESS RATES: While there's certainly crime and homelessness in Richmond, the numbers are far lower than elsewhere in Metro Vancouver, especially downtown.
THE CANADA LINE: A new Skytrain line directly into the heart of Richmond has spearheaded much of the recent development in the city, giving commuters a way into downtown Vancouver in 25 minutes while residents of Coquitlam, Langley and Delta find themselves often fighting bottlenecked traffic.
PARKS AND TRAILS: Walking the dyke is a regular go-to outdoor activity for Richmondites, but with Richmond Nature Park, Garry Point, and Terra Nova as places to go to get away from it all, it's easy to get intentionally lost in nature south of the airport.
CLIMATE: While Richmond gets as cold as anywhere else in Metro Vancouver during the winter, it generally receives less snowfall, less rain, and much less smog than other parts of town, due to the jet stream coming directly off the water, rather than over the Lions.
ABUNDANCE OF TEAR-ME-DOWNS: There are plenty of homes in Richmond that were built on the cheap in the last forty years, with no architectural appeal and large lots. These can usually be easily demolished and turned into townhomes or large modern family homes with little local protest, whereas similar development in Vancouver can be frought with bureacratic impediments.
OLYMPIC EXPOSURE: Having Richmond shown to hundreds of millions of people around the world during the recent Winter Games has given the city no end of interest from companies and immigrants looking to move somewhere new.
OPEN SPACE: Though much of it is listed under the ALR, Richmond has no shortage of open space that can be (and often is) turned into developed land. The infamous Fantasy Gardens was recently bulldozed to make way for a new development at Ironwood, which is one of Richmond's thriving new communities.
AVAILABILITY OF PURCHASE OPTIONS: Recent development in Richmond has vastly increased the real estate inventory available to prospective buyers, with waterfront views and modern facilities being a big draw.
COMMUNITY EVENTS: Weekend festivals such as the Ship To Shore tall ships event give locals a regular diet of things to do that cost little or no money. The annual Children's Festival, regular musical events and summer outdoor movies add to the fun.
Now keen observers will note this is only 20 reasons from a list that was supposed to provide 24.
Where are #'s 21, 22, 23, and 24?
Unfortunately if you follow the link above and click your way through the '24' reasons, you will discover that there are only 20 listed.
Presumably the last four are a take on the Location, Location, Location mantra.
In this case it would be... Gullible, Gullible, Gullible Gullible. Because that's the only way to describe the mindset that believes these factors off set the reality that is occurring in Richmond.
“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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