September Observations

Real Estate sales for the month of September are now officially over.

Vancouver Realtor Paul Boenisch, who provides the figures you see on your right, hasn't provided an update yet so we don't have figures for September 28th at this time.

Another realtor (Rob Chipman) has indicated that we closed out the last sales day of September with only 64 sales.

That will make September 2012 worse than September 2008 and the worst sales total for the month of September since 1994 - when they started compiling these records. This, as you know, follows a summer that was just as abysmal.

The chart below shows you those monthly sales (2012 lacks the reported 64 sales on Sept. 28).

Sales in the suburb of Richmond (formerly a HAM hotbed) continue to be horrendous as well.  Early speculation was that there would be an increase in sales (from homes that had drastically reduced prices below assessment), but even this trend collapsed.

There are currently 1,187 single family houses listed for sale in Richmond. As of yesterday there had only been 53 sales.

That puts also Richmond on pace for the worst September since 1994.

(hat tip to Inventory on VCI for both of these charts)

Observer (from Vancouver Price Drop) notes that the downtown core is starting to see price movement on condos available for sale.

It has everyone keenly watching to see what will happen now in October.

As we noted on Thursday, one Vancouver realtor is forecasting weaker sales in the coming months based on historical data. This is a trend which Jesse, from the excellent blog Housing Analysis, originally identified early in September.

Will be see surging inventory to match this anticipated drop in sales?

October/November historically see the pace of listing decline significantly.  If someone was going to list for fall, they usually do it in September.  Does this mean listings have peaked for the year?

Regular VCI contributor YVR2ZRH offers this insightful analysis:

Van West and East SFH were really some of the only places that were up last month over the previous month. West Van was up but Aug was really low so no surpirse. 

Richmond actually fell even more. It is now down really to a basic trickle. However, Richmond sold way more new builds on large price reductions than tear-downs, which did not seem to sell at all. Condo prices are down. On an average basis, we are down pretty much 5% from last month.  SFH prices were actually down on average but there were some really odd movements in median. There has been a recent slow down of the lower priced tear downs but an increase in the higher priced properties (who have not moved for months – so are now getting big price reductions). It’s like a wave motion where these high priced places finally take price reductions – some after 10-18 months. 

Burnaby, North Van and West Van sold about the same at approx 40 units. 

Inventory increases were large in Van-East attached (13%), North Van SFH (22%) and Burnaby (9%) from the previous month. MOI has just reached 12.0 for REBGV (remember that PaulB includes land/multi which REBGV excludes.) 

Sales in final half of month was at a pace which was 5% above the first half. This is typical. September is supposed to be busy – it wasn’t – no matter how you slice it – it was terrible – but September did tick up from August. 

Thus we should see about 1900 units sold this October. It’s a bit to do with the business days / weekend but 1900 is really possible at today’s sales volumes – this will lead to MOI of 9.8 for Oct. That is not really great but it is a turn from Sep. 

October 2012 will not fall to the 2008 levels – not even close – it’s just not possible. Although we are at 12 for MOI now, we can not expect that to continue and can not expect inventory to increase any more. It may end Oct at the same level as Sep – but we are done. The year is over – it was bad. If you take the YTD sales, I think we are the worst in 15 years. Perhaps when we are done, we will be below 2008.

As always the unfolding story of the real estate bubble is fascinating to watch. 

In 2008 the dismal sales were triggered by the Financial Crisis.

This time around sales are coming in worse than 2008. But, unlike in 2008, collapsing sales will not see intervention from government to prop up the market this time around.

Have we only delayed the reckoning that should have occurred in 2009, and it is finally playing out now?

We shall see.

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Email: village_whisperer@live.ca
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Has the Boomer Trigger now been pulled in Vancouver?

Faithful readers know we have often talked about the Boomer Trigger.

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 for between $40,000 - $60,000 is now 'worth' between $1.5 - $2.5 million dollars.

Thus the Boomer Trigger... trigger the sale of the one significant asset they 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.

Have we seen another example of this trend in the Vancouver neighbourhood of Quilchena?

This is 2681 McBain (hat tip to ZRH2YVR): 

This 3 bedroom bungalow (advertised as having 4 bedrooms and 2 bathrooms) near Prince of Wales School has had the same owner since it was purchased in 1955.

I shudder to think what they paid for it then.

It has been languishing on the market and the desperate Boomer has cut the asking price to $1,599,000.  Here is a screenshot of the listing:

The key element is in the listings description:

Priced $566,300 under assessed value.

Word is 2681 McBain has now sold... and for less than the most recent asking price.

Now you should know that on the r/e chat boards, Real Estate bulls have been quick to point out that it wasn't a massive amount of inventory on the west side combined with a dearth of sales that resulted in a sale so dramatically below assessed value.

The neighbourhood speculative builders and many Asians wouldn’t purchase it because it was at the end of a T-steet. Apparently this is a big no-no for the all important Asian 'Feng Shui'.

According to VCI contributor 'West Coast Woman'

About two weeks ago I was viewing a new build in the area and started talking to a Caucasian couple at the open house. I told them about the McBain house and their first reaction was “yeah, but it’s at the end of a T-street so it has little resale potential”. I was shocked at that comment and replied that it was a much superior location with much less traffic (probably less than 20 cars a day drive down that street) than the one we were viewing. Regardless of whether the T-street thing makes any sense, it WAS the reason for the reduced price as the long-time older owner simply couldn’t take care of the house anymore and was motivated to sell.

Two houses in the 2400 block McBain sold a couple of months ago in a crazy bidding war. One was purchased as an “investment” by an Asian man living across the street. It is the one now being rented out. The one next door to it (which wasn’t even listed) was purchased by someone who “lost” the bidding war; it is now back on the market for about $2,670,000 – about 150,000 more than they paid for it. Another house across the street at 2408 McBain is another slightly renovated flip – purchased last year for about $2.2 million, it’s now back on the market for about $2.6 million!

Any truth to this? Perhaps.

The one part I do agree with is that the reduced price was because the long-time older owner simply couldn’t take care of the house anymore and was motivated to sell... which is the whole essence of the Boomer Trigger. She had the ability to move significantly on the price, she wanted to sell the property, and she pulled the Trigger.

So now we have a Vancouver west side property that has sold for about $600,000 BELOW assessed value as a result.

The Boomer Trigger at work. I expect to see more like this if sales continue to stagnate.

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Email: village_whisperer@live.ca
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Please read disclaimer at bottom of blog.