The Fall(ing) Market

You may recall our post about Vancouver realtor Keith Roy whose July declaration that it was time to cash out of the Vancouver housing market garnered national headlines.

Well Roy is back with another local housing analysis.  And it might just surprise you.

Real Estate sales in September are rivalling the benchmark dismal month of 2008, and may close out worse than that fateful month during the GFC.

These September sales totals come, as you know, after what has been a absolutely abysmal summer.

But what if results for the rest of Fall are even worse than the dreadful summer of 2012?

Roy takes a look at Vancouver detached housing sales on the west side of Vancouver in Fall from the past 10 years and suggests this is exactly what is about to occur (click on image to enlarge).

Says Roy:

If we can agree that ‘summer’ is June, July and August and ‘fall’ is September, October and November, then for 8 of the last 9 years, summer has been busier than fall - in up and down markets. 

Given that today’s market is widely considered to be slower than last year’s and buyers are much more hesitant than they have been in the past, coupled with the fact that many prospective buyers have yet to sell their home, I can easily suggest that fall will once again be slower than summer.

But that's just detached houses. What about the rest of the market?

Roy takes a look at the MLS sales numbers for all product types on the west side of Vancouver - houses, condos and townhomes combined - and while the results are a little bit different, Roy states that, once again, for 8 of the last 9 years sales have been busier in the summer than they were in the fall. The only difference is that when attached homes are included, the only fall that was better than summer was 2003 - which had an anomalous month in October 2003.

So Roy thinks sales will continue to suck. What about prices?

Once again realtor Keith Roy offers a very un-realtor-like assessment of what will happen to prices (while also taking a shot at the REBGV and BCREA):

The real estate board has taken great pains to assure and calm the public that the Greater Vancouver real estate market is strong and stable - particularly after my last blog post received so much media attention suggesting that the current trend of high supply and low demand will lead to an adjustment of prices. 

Unless someone can convince me otherwise, when it comes to short term pricing in the Vancouver market only two variables matter: Supply and Demand. 

Since my last blog post, supply has remained relatively static and sales have been slower that at any time in the last 10 years (with the exception of the August prior to the 2008 crash). 

As of September 16, 2012 there were 1014 homes for sale on the west side of Vancouver, down slightly from June’s 10 year high of 1078 available homes. After peak sales volume in February, sales in every month in 2012 have been lower than the month that preceded it reaching a low of only 75 home sales in August - 46% lower than the 10 year August average and 55 homes less than August 2011. 

We are only hearing anecdotal evidence of a busy fall market with new listings popping up, buyers coming to open houses again and some houses selling in multiple offers. But the typical fall buzz has yet to be seen.

Many Realtors are struggling to get offers on listings. In hopes of prices declining or another home coming on the market, many buyers are reluctant to write offers. 

September is not proving to be the saving grace many thought it would be.

In the end Roy believes the autumn market may best be re-termed the Fall(ing) Market as the dynamics of supply and demand play themselves out.

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Another West Side Realtor says the market is collapsing, tells clients "you must cut prices to sell"

Summer may have finally arrived on the Wet Coast, but the saying of the week remains 'when it rains, it pours.'

But instead of the endless Rainforest drizzle, the topic du jour is realtors.

For the last week and half the focus has been realtor Keith Roy.

But another horse has entered the Vancouver West Side race of realtors telling clients the market is crashing.

As profiled by Garth Turner yesterday, realtor Sam Wyatt is the latest to do a spit-take on the REBGV/BCREA/Sauder School of Business kool-aid.

Wyatt's synopsis of the Vancouver real estate market?

“This market is collapsing.”

You don't say Sam?

From his website:

Homes are simply not selling in the same volumes as they have been and the longer people wait to reduce prices, the larger the inventory will grow.

Last month I pointed out that the active listing volumes for detached Westside houses actually exceeded the highest volume during the credit crisis. In June the number of houses actively listed was even higher at 1078. During the credit crisis, the active listings of detached homes on the Westside never exceeded 1053 houses. Keep in mind also that the three year average number of active detached homes listed on the Westside between January 2009 and December 2011 was only 589. This is a very serious situation.

One of the most influential elements of the Vancouver West real estate market has been the large proportion of sales to foreign buyers, particularly from China. From a purely anecdotal point of view, the number of these sales has significantly diminished. We have been in a "top-down" market were the sale of the most expensive real estate has driven up prices in the rest of the market as sellers have opted to down-size or move to less costly neighbourhoods. By moving into lower price points, the sellers of higher priced real estate were able to drive up prices because they were relatively flush with cash compared to those making lateral or up-size moves. As a result, the closer to the entry level of the market, the fewer gains were made. Gastown apartments have made little price gains if any over the last 3 years while detached homes have nearly doubled. When houses prices fall, the rest of the market will almost certainly follow.

The new rules for Canadian Mortgage and Housing Corporation (CMHC) insured mortgages will have a detrimental effect on sales at the entry level of the market. Maximum amortization periods for insured mortgages have been reduced to 25 years. Over the past several years this maximum has fallen from 40 to 25. The most recent move from 30 to 25 years will be the most significant in that it will exclude many first time buyers from qualifying even while interest rates are near all time lows. If the banks follow suit and adopt the CMHC rules , as they almost always do, it will likely also dissuade many investor buyers from purchasing condos to rent out. I predict this because the lower amortization period will significantly increase monthly mortgage costs and lower the proportion of those payments that are tax-deductible interest.

Vancouver's real estate market is getting and is going to get hit from both ends. So, now that you are thoroughly depressed, here is the bright light: IF YOU SELL NOW, YOU WILL STILL BE SELLING NEAR THE TOP OF THE MARKET. If you plan to sell, you will need to price BELOW the most recent comparable sales prices. If you don't do this, your listing will stagnate.

While it lacks the flair Keith Roy had for kicking his industry under the bus, it's another indication - from a realtor himself - of the looming potential for our housing bubble to burst in spectacular fashion.

It also echo's Richmond realtor James Wong's advice that if you "want to sell your property, deep price cuts are needed."

With realtors seemly tripping over themselves to publicly tell you to bail on the market ASAP... it might almost make the average person begin to take notice of what's coming.

Horrors!

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Outspoken realtor censured for critical comments about his industry

A week and a half ago we told you about Keith Roy, a realtor with Macdonald Realty.

He was the westside realtor who was telling clients it's time to cash out of the real estate market in Vancouver before prices decline significantly.

Last Friday the local and national news picked up on his story.  In this post we relayed how the Financial Post newspaper had picked up on his warnings.

His story was significant, not only for the message he was conveying... but also because of the harsh criticism he had for his industry.

Now let's not build Roy up into something he's not.  Far from being a sage realtor looking out for the welfare of homeowners (or one who is looking out for up and coming young buyers), Roy is an opportunist.

Nothing conveyed this more than a 2009 National Film Board documentary.

Shot as part of a series on the economy, the NFB produced three episodes about Roy which clearly cast the then 27-year-old for what he is: a narcissistic opportunist.

In one episode he helps his lawyer flip a condo for a $100,000 profit, and openly admits he uses gifts to bribe clients.

He also describes his dreams & strategies and tells us what it takes to muscle in as a RE ‘professional’. Tidbits such as dressing for ‘gravitas’, becoming a celebrity, poaching assistants, ‘taking it up a notch’ and quick profits are all part of the formula he espoused.

So it wasn't exactly a surprise to see him attempt to leverage all the recent mainstream media articles about a pending housing crash to his benefit.

Let's face it... the ultimate end result of his most recent media foray was to capitalize on the negative housing situation. As he said on his blog:

If the media picks up on this story, you can be sure the rest of the market will follow the west side. If you are on fence about selling your home, thinking of cashing out, nearing retirement or need your equity to buy your next home, now might be the right time to call.

And since he promptly went to every media outlet with his opinion's about imminent doom, there was little doubt the media would pick up on 'this story'.

More significant was the manner in which Roy cast the current situation.

He didn't just capture the doom-ish characteristics of the market... he out-and-out threw his industry under the bus. Roy wrote:

"Far too often the real estate industry, of which I am obviously a part, makes excuses for slow sales periods, declining prices and difficult negotiations. These excuses are self serving."

You gotta love the chutzpah.

He's bang on, of course.  And there's no doubt in any bear blogger's mind that if he hadn't drawn such intense media attention that the 'Industry' would have censured his opportunistic hiney in a way that would have made that blog post disappeared within the week.

As it is, he simply had to remove parts of his commentary.

The original blog post was recently amended and this caveat posted before the body of his commentary:

*This version has been edited because it was deemed by some of my colleagues to be disrespectful to the industry of which I am a part."

Disrespectful? Or brutally honest?

Perhaps both.

And whether you believe Roy is simply an opportunistic sales weanie or not... his comments were a refreshing bit of honesty from a member of an Industry which, in large part, Roy correctly describes as self-severing and "makes excuses for slow sales periods, declining prices and difficult negotiations."

When all is said and done it may be this one censured phrase for which we remember Mr. Roy.

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Fri Post #1: Realtor's bashing of Vancouver market goes mainstream

On Wednesday you met realtor Keith Roy. He's the westside realtor who is telling clients it's time to cash out of the real estate market in Vancouver before prices decline significantly.

On his website he noted:

If the media picks up on this story, you can be sure the rest of the market will follow the west side.

Well it seems Roy has been doing everything to ensure the media does pick up on his story.

Yesterday he was on TV on BNN and now the Financial Post has picked up on his story.

As John Andrew, a professor at Queen’s University, said it’s very rare to hear the real estate community downplay the market.

I suspect we are in for quite the battle in the media in the coming weeks.

(hat tip JR)

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Wed Post #3: Westside Vancouver Realtor warns clients: "It's time to Cash Out!"

Meet Keith Roy.

He's a realtor on Vancouver's West Side, home of HAM (Hot Asian Money) central for the past five years.

He has a message for you if you're a home owner - a home owner like he was until 4 weeks ago - if you own: "It's time to cash out."

In a straight forward message posted to his website today, Roy tells you exactly what this blog has been saying about real estate in Vancouver: the market is headed for a crash and the wise money is getting out while it can.

Here is the content of his message to those with the wisdom to listen:

Wednesday, July 4, 2012

Time to Cash Out?

by Keith Roy on Wed, Jul, 4, 2012

I’m a REALTOR and I sold my own home 4 weeks ago. It wasn’t too big or too small. It’s only 6 years old and still feels new. I sold because in 6 months my home will be worth less than it is today. I think its time to cash out! Let me explain.....

To ignore the truth doesn’t change the truth. And so it is in the Vancouver real estate lately. Far too often the real estate industry, of which I am obviously a part, makes excuses for slow sales periods, declining prices and difficult negotiations. These excuses are self serving. The facts are simple; real estate is easier to sell when prices are going up, realtors are happier when more houses are selling and open houses are more fun when buyers come to look. However, the good times pass like the bad ones do. I would suggest that good times have passed in the Vancouver real estate market, at least for the foreseeable future.

Here is a great example of where the real estate industry loses the public trust. The headline of the June 2012 Real Estate Board of Greater Vancouver Newsflash is “Greater Vancouver housing market favoured buyers in June”. The opening line was a bit more accurate: “The number of residential property sales hit a 10-year low in Greater Vancouver for June, while prices remained relatively stable.” But what does “relatively stable” mean in a market as hyper sensitive as Vancouver where real estate is a hobby, sport, profession, retirement plan and cocktail party conversation all rolled into one?

The Greater Vancouver real estate market is anchored on the west side of Vancouver. With its limited land supply and stunning views of English Bay and the north shore mountains, the west side of Vancouver from Main St. to UBC has always been a hot spot for Canadian real estate. It has been 2 generations since owning a home on the west side of Vancouver made sense for an average income family and I doubt those days will ever return. The west side housing market is a great bell weather for the rest of the lower mainland because it drives media headlines and experiences the largest swings.

Two key factors drive real estate activity - Supply and Demand. These factors work together to determine volume and prices. The equations looks like this:

Low supply + low demand = Prices are stable.

High supply + high demand = Prices are stable.

Low supply + high demand = Prices go up.

High supply + low demand = Prices go down.

Remember, according to the real estate board of Greater Vancouver, prices in June remained “relatively stable”. Stability is a result of low supply and low demand or high supply and high demand. And in a dynamic real estate market such as Vancouver one month does not determine “stability”.

Lets look at the numbers:

There are only 4 months in the last 10 years where the number of available houses on the west side of Vancouver was higher than 1000 - September and October 2008 and May and June 2012.

The truth of the supply side of the equation is: There are more sellers competing to sell their home on the west side of Vancouver now than at any time in the last 10 years! 

 

Demand for homes on the west side of Vancouver is falling. In fact, it has been falling for 5 straight months. Demand has actually been about 35% - 40% off of the 10 year average for 4 months now. If this trend keeps up the number of sales in July will drop below 100 - which it has only done once in the last 10 years - July 2008 - which was just 4 months before the worst month ever which produced one of the sharpest price drops Vancouver has ever seen.

The truth of the demand side of the equation is: Lowest June home sales on the west side of Vancouver in the last 10 years!

So the new equation looks like this:

More sellers than ever

+ Less sales than any previous June

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Today’s real estate market

As a REALTOR I can assure you people are still buying homes. In fact, 2362 homes were sold in June in Greater Vancouver (Remember, this is the lowest number of sales in the Real Estate board of Greater Vancouver in 10 years). There are all sorts of reasons people buy and sell homes - not just price. Whether it is a newly married couple who want a place of their own, a lower income buyer taking advantage of mortgage rules before they change, growing families, empty nesters, downsizing seniors or people moving up and down the property ladder who don’t want to rent, there will always be sales. Demand will never reach zero.

Right now, supply is up. Way up. Demand is down and trending lower. I hate to point out the obvious, but prices are a result of supply and demand. In today’s real estate market, the equation looks like this: High supply + low demand = Lower prices.

There is still lots of opportunity to sell your home. I’m just not sure how much longer it lasts. Prices have stared to fall but demand is nowhere near the levels it dropped to in fall 2008. Different product types have different dynamics. Condos, townhomes and luxury homes are all markets unto themselves. But its the west side houses that make the news headlines. If the media picks up on this story, you can be sure the rest of the market will follow the west side. If you are on fence about selling your home, thinking of cashing out, nearing retirement or need your equity to buy your next home, now might be the right time to call a REALTOR. Otherwise, I’d plan to hold on for another rough ride. I think 2012 will be another one of those years where Summer is better than Fall.

Keith Roy is an award winning REALTOR at Macdonald Realty in Vancouver, BC. He has been ranked in the top 10% of all Greater Vancouver REALTORS for the last 5 years. Keith sold his own home 4 weeks ago based on these numbers. Keith can be reached at homes@keithroy.com

This stunning realtor missive is the equivalent of a phone call from your stock broker in which your broker tells you that the market is a about to tank, he just sold all his stock, and he's recommending you do the same... NOW!

You can't have things spelled out any clearer than this.

(hat tip to pennysaver on VCI)

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