The Outer Limits

If there is a theme to the 2011 year for Real Estate in British Columbia it is how Vancouver reached new all time highs while the Outer Limits (anything outside Greater Vancouver) languished.

And nothing highlights that trend more than Victoria.

The Victoria Times Colonist newspaper reports today that the city's home sales tumble to 11 year low.

According to year-end figures from the Victoria Real Estate Board, 2011 bore witness to the lowest total number of unit sales in 11 years. And last year's 3,069 single-family home sales was the lowest since 1990. 

Victoria Real Estate Board president Carol Crabb says the reason for the dramatic drop ranges from  global economic uncertainty to people waiting and hoping to see prices fall.

"The whole feel of the market has shifted a little," she said. "It has slowed down. People are taking longer to make decisions, though I'm not sure why when interest rates are so good. But there is some uncertainty out there."

It's a scenario that sounds eerily like the United States where record low interest rates have simply failed to resuscitate a collapsed real estate market.

One certainly has to wonder if the beginning of the collapse in, in fact, upon us.

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The shifting currents

Back in April we posted that the noose was tightening on the larger periphery around the Village on the Edge of the Rainforest.

The Victoria Times-Colonist reported that, "The first quarter of 2011 has proven to be a tale of two real estate markets in B.C. - the Lower Mainland and everyone else."

But as the dog days of summer arrive is the level of concern starting to rise in the Lower Mainland?

One local Vancouver realtor sent out the following comments in an email last week:

• I hope you have been enjoying our summer and the sunny weather. Hopefully August will make up for the dismal summer we've had so far. I just looked at the weekly outlook and it looks very promising.
  
  Unfortunately, the same cannot be said about our markets today. Even as I type this, most major stock markets around the world has reacted quite negatively to the US downgrade by S&P. Talks of falling back into a recession dominates the news today. The major concern is not limited to the US Debt situation but also to the European Union and its sovereign debt crisis' amongst its members including recently 2 major powerhouses Spain and Italy and of all places, China. Yes, China seems to be struggling with the fallout of the US Debt crisis as well as internal problems surrounding rampant inflation and social unrest due to the growing gap between the poor and the wealthy.
  
  Locally, the looming financial/debt crisis may have begun to affect our real estate market in the sense of forcing some people to rethink their decision to buy in at this time. This change in sentiment along with the Summer doldrums has resulted in a decline in sales of ~21% from the month of June and a small overall decline in average prices by 0.1%.
  
  Anecdotally, I have heard from other realtors in the Real Estate Industry having a slow summer with the exception of just a few higher end markets targeted by a specific group of Buyers.
  
  Is this the beginning of the long awaited 'correction'? I don't know but it is not a bad idea to get your finances in order as soon as possible because there seems to be more and more cracks forming in both our financial and real estate markets. In 2008, we were saved by emergency quantitative easing by the Bank of Canada. This time around the Bank of Canada have a limited ability to do the same simply because we are already at very low rates. Sorry for the doom and gloom but you know me, I try to tell it like it is.
  
  I hope you'll have a great August and enjoy the awesome weather we are having. Feel free as always to comment or ask questions. I would love to hear from you. Take care and keep in touch.

Not exactly a Tony Robbins moment, is it?

Another Vancouver Realtor, Larry Yatkowsky, has also chimed in with less than bullish comments on the current state of the market:

• In this community snapshot the number of sales alone – almost half of the previous month, would suggest that the Vancouver west market is staggering. A case can also be made that suggests prices are falling – at least for now.
  
  There was talk back in May and June that we could expect a scenario like this to develop. Vancouver Realtors call it the ‘summer doldrums’ – a slow period of real estate activity typically usurped by hazy summer days of fun and sun. Though some whispered about the potential for another global financial crisis humans by their nature, have a glass half full mentality. No one expected the U.S. to blink. Fewer still, anticipated that they would be thrown into another round of that chaos so quickly.
  
  Real estate does not react as quickly at the financial market place and the numbers here suggest that something different is going on as it began prior to this last go round in the financial markets. However, it seems reasonable to expect that in the weeks ahead as the losses are calculated, one could expect to see the fall off on the west side continue and begin to ripple through to other communities.
  
  ... should that continue and the calculated losses prove greater than now known, the fall season of Vancouver’s West Side party invitations will have a new twist asking you to come to a pot luck. Don’t be surprised if the invitation includes the obligatory BYOB.
  
  If this proves true, expect to hear post introduction conversations that begin with these words: “wow... can you believe the decline in Vancouver’s real estate!”

Across the Georgia Straight the Capital City continues to feel the pain.

The Victoria Times Colonist reports that "for the second straight month, the number of homes for sale remained at 15-year highs while the average selling price dropped in all categories."

There are now nearly 10 months of inventory (generally 6.5 months of inventory is considered balanced).

Conditions have lead one Victoria area Realtor to state that the consensus among his R/E colleagues is that offers are coming in well off the listing price.

• "It will be up to the sellers to come to grips with that reality. The buyers aren't lowballing, they are saying that's what they will pay."

Could it be that the tide has finally turned on the Canadian West Coast?

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Real Estate Prices are continuing to fall in Victoria

Back in April we posted that the noose is tightening on the larger periphery around the Village on the Edge of the Rainforest.

The Victoria Times-Colonist reported that, "The first quarter of 2011 has proven to be a tale of two real estate markets in B.C. - the Lower Mainland and everyone else."

In April real estate sales in Victoria were down 18.1% and the average price fell 2.8%.

Last week the Times-Colonist reported June data. According to Royal Lepage, the average selling price of a detached bungalow in Greater Victoria has now dropped nearly 5% in the last year.

As expected, the local Royal Lepage representative tried to put a positive spin on the data. Carol Geurts of Royal LePage Coast Capital Realty said:

• "We're not seeing a lot of movement in the Victoria real-estate market, so inventory is up. However, the average price decrease for most homes was less than two per cent."

Prices are down nearly 5%, but the average price decrease for 'most' homes was less than 2%?

What is she suggesting?

Is it that only the crappy homes and/or the homes being sold by desperate sellers that are dropping in price?  Is she saying most homes (meaning yours) aren't really dropping in price so you don't need to worry about these negative statistics?

Uh-huh.

As our friends over at World Housing Bubble blog have noted, this sort of rationalization was seen in California at the start of the American housing bubble burst. Realtors would argue in the press that while the value of houses for sale was dropping, the value of houses that weren't for sale was holding firm.

Look for this sort of spin to ramp up over the coming months.

The Times-Colonist also noted that the price of a new home in Victoria dropped 1.7% and in Vancouver it dropped 0.8%.

We will watch these trends with great interest.

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The Noose is Tightening

We've had a lot of our attention focused on the topic of Silver lately, but we are still watching the real estate bubble very closely and await the April statistics for a measure of where we currently stand.

One thing is for certain, however.

The larger periphery around the Village on the Edge of the Rainforest is NOT selling at all and we do not expect the April data to change that trend in any way.

When the month end of March statistics came out, the local blog Vancouver RE noted that in the final two weeks of the month (after the new mortgage rules came into place) the outskirts of the Lower Mainland were sucking wind.

On the Sunshine Coast, 6 detached residential units sold out of 517.

Squamish had 4 sales out of 196.

Whistler had 0 sales out of  178 detached listings and 2 condos sold out of 279 on the market!

In the Gulf Islands only 3 residential detached units have sold since January 1, 2011 out of 136 listed.

In the Central Okanagan, sales were down 25% year over year (YOY) with months of inventory (MOI) at a staggering 23 months.

In the Northern Okanagan, sales are down 15% YOY with 23 MOI.

The Sushwap sales are down 30% YOY with a staggering 39 MOI!!

And last week the Victoria Times Colonist summarised conditions best when they said "The first quarter of 2011 has proven to be a tale of two real estate markets in B.C. - the Lower Mainland and everyone else."

In Victoria sales were down 18.1% and the average price fell 2.8% to $491,336.

The rest of Vancouver Island did not fare much better with sales down 12.2% and average price falling slightly to $318,199.

Carol Crabb, president elect of the Victoria Real Estate Board, said it best by noting, "There's nothing to push prices up because there's so many properties and there's nothing to push buyers into making a decision as there's lots to choose from and lots of time to make decisions."

The Vancouver real estate bubble remains, but it is clear the noose is tightening.

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