Random thoughts

A few random items for you this morning.

(1) On the topic of HAM

The topic of Hot Asian Money (HAM) in Vancouver is a strong one. There have been lots of stories about how west side houses have been snapped up by HAM and sit vacant (the Courier newspaper did an article about this, but I don't have the link at the moment).

In a report released by the Bejing News, google translated here, Bejing alone has 3.8 million vacant houses, presumably bought by speculators in the real estate frenzy there and those homes are being held for the right time to 'flip'.

3.8 million?  Even in the United States, five years into a bursting housing bubble, it is estimated only 2.54 million homes are available for SALE!

Imagine the panic to dump if the China/world economy turns significantly downward?

(2) On the topic of Vancouver Speculators

Speaking of not ending well, a discussion went on the other day over in the comments section of the blog Vancouver Condo Info. Contributor 'Patsan' noticed that one person (Gary) was advertising 3 homes for rent on the west side of Vancouver and the tone of the craigslist ad seemed 'desperate'.

I noted that if the phone number listed was 'googled', there were a whole host of properties available for rent from this 'Gary' person. One diligent reader of the site did some research and noted:

"This Gary guy has at least 12 West Side and Richmond properties advertised for rent. They are all vacant and available now and if you goggle the address all were recently purchased. Most of the properties on the West Side sold for close to 3 million and the Richmond ones are in the 1.5 million range. The guy must be a rental agent or ring leader behind investors who have recently dropped at least 20 to 30 million on houses to rent. The ads all state minimum 1 year lease so they are not looking for quick flips. None of the ads have photos or much details. The guy doesn’t have any houses advertised that appear to have been previously rented so he must be a newby to the game."

And this is just ONE group of speculators in Vancouver.

Now multiply Gary's group by a couple of hundred and imagine the speculative panic here if the housing market in Vancouver turns downward.

(3) Comparing Statistics

Speaking of the euphoria that buyers were in a year ago, contributor VMD over on Vancouver Condo Info posted some comparisons of single family home sales from last May 2011 to this May 2012 to show just how bad sales are this year compared to last year.

1. Van West

Sales YoY -47%

Lists YoY +36%

2.West Van

Sales YoY -59%

Lists YoY +23%

3. Burnaby

Sales YoY -38%

Lists YoY +23%

4. Van East

Sales YoY -28%

Lists YoY +26%

5.Coquitlam

Sales YoY -21%

Lists YoY +21%

6. Richmond

Sales YoY -20%

Lists YoY +11%

VMD notes Richmond was the first to slow down last spring, so its numbers were pretty bad last May. This May is even worse.

Will Boomers pull the trigger in greater numbers as the market worsens and slash the price point they will accept even more? Thus pushing the drop from 12% to 20%?

Could the drop accelerate even greater than that?

(4) If we slide downward, how far could we go?

If you follow this blog, you already know my thoughts.

Consider this musing from Vancouver realtor Larry Yatkowsky who broaches the concept of a 32% drop in prices:

Let’s start at the highest average price ever reached in Vancouver for a detached home – a mere $1,235,244. Now let’s also assume this market is on the skids sliding down the drain faster than we think to bottom out at something most of us would not imagine – a market that drops so much it hits May 2009′s Average Price of $831,171.

With a price drop of $404,073... that's a 32% drop from the all time high.

Consider that a 32% drop in prices only takes us back to 2009.

Larry argues buyers will rush in at this point (and I agree), but rather than establish a bottom for the 'correction' - I can't help but recall the 'phases of a bubble' chart:

A rush of buyers into the market at this point would just about reflect these phases perfectly, wouldn't it?

Can you see all the pieces falling into place for a significant drop?

Is a 70-85% collapse in prices still all that hard to fathom if these elements come to pass: The China Trigger + The Speculator Trigger + The Boomer Trigger?

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Sun Post #1: Vancouver has "too many sellers trying to cash in at the same time."

The falling Vancouver market continues to make news in the mainstream press.

Yesterday it was CBC with a story lamenting that Vancouver has "too many sellers trying to cash in at the same time."

The Mother Corp tried to balance the negativity by looking for the silver lining in a market with a huge decline in sales and a massive increase in listings.

But the best they could do was headline the bad news by saying, "Uncertain fate for Vancouver real estate prices".

While the fate of the current downward trend may be uncertain for CBC, they do tell us exactly what you have been reading here on an almost daily basis:

Vancouver's real estate market has taken another interesting turn, with listings up and sales down during what is usually a busy time of year.

In May, average prices for houses have dropped about $150,000 compared to one year ago. That 12-per-cent drop wiped out two years of price increases. The reason appears to be that too many more sellers are trying to cash in at the same time. Listings are up by 23 per cent, but fewer are buying: sales are down 24 per cent.

Probably, on average, about a 150 or 160 homes in Vancouver are reducing their price every day in the hope of catching, getting ahead of the train and maybe get out before they can't," said realtor Larry Yatkowsy.

Reality is starting to set in.

The Spring Market is not going to arrive this year. Sellers are starting to slash their prices.  The Boomer Trigger is being pulled.

Is the market starting to crash? We will see. As economist Tom Davidoff, of UBC’s Sauder School of Business says,

"It’s going to take several months of data-confirming of what we seem to be seeing before I would be anywhere close to be prepared to say, 'That's it, we had a bubble and now it's bursting.'”

But if you're a Boomer sitting on the sidelines who plans on relying on the bubbilicious values for your retirement fund... do you wait to see?

Or do you jump in, list your house with the others and pull the trigger by slashing your selling price aggressively before another 12% evaporates from the market?

And what of the ones already listed but watching a market drop while listings stagnate? Time to cut and run?

We shall see.

The video from CBC...

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Friday Post #2: Vancouver detached home statistics for May 2012

Every month realtor Larry Yatkowsky releases month end real estate data and the information he provides is greatly appreciated.

And as you can see by the graph, the drop in the detached average home prices continues.

The May detached average home price of $1,037,331 is down from February’s high of $1,235,244. It has now dropped 12% Year Over Year (YOY).

As Yatkowsky notes, this is a low not seen since November 2010 when the average was $1,043,161 meaning two years of gains have now been wiped out.

Clearly the combination of rising listings and declining sales is starting to have its effect.

Active listings for detached homes in Vancouver are at an all time high of 7,577 units, up 23% YOY.

Meanwhile sales for detached homes in the City are down 24% YOY.

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