Real Estate agents continue to whine about mortgage changes

You get the feeling more and more real estate agents are feeling the heat of withering sales. The whining about the government's changes to the mortgage rules continue unabated.  The latest is from our buddy Owen Bigland.

I was wrong when I said I didn't think the new mortgage changes this past July would have much of an impact on the overall Vancouver market. I should have realized the domino effect it would create. 

When you cut off the 1st time buyer existing home owners who want to move up the property ladder by selling their place and buying a bigger home - they can't do it. 

Here's my rant! I'm all for Canadians reducing some of their debt, I've blogged about it many times but why on earth is our finance minister going after good debt like mortgages before he goes after all the bad debt that's out there like credit cards? 

Does he not realize that for the vast majority of Canadians in their 60's, 70's and 80's their principal residence is the largest and sometimes the only asset they own. Most will tell you that looking back at buying their first home was the best financial decision they ever made.  

It's like a forced savings account. Maybe Ottawa should get their own financial house in order before they start telling Canadians they can't buy that first home. You might also want to look into the credit card industry and some of their practices.

Gee Owen, maybe your right. Ottawa should get their own financial house in order before the continue to subsidize the real estate industry through CMHC insured mortgages and with artificially low interest rates?

If it so happens the mortgage rule changes (which don't even return us to what those very rules were 15 years ago) are driving housing prices down to what the vast majority of Canadians in their 60s,70s and 80s originally paid for their homes, then getting on the property ladder wouldn't be an issue now, would they?

In fact, aren't today's regulations (and interest rates) even more lax than what they were for those Canadians in their 60's, 70's and 80's when they first bought? Perhaps we should return to the  mortgage rules that were in place then in order to bring the market back into balance?

Just a  thought.

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Richmond real estate agent's response to the latest wave of optimism?

One of the biggest frustrations from some market watchers has been the failure of the market to 'crash' in spectacular fashion.

But if you have followed this blog for any length of time you have watched the progression.

First it was the outlining areas of B.C. Then it was Vancouver Island.

All last year we charted the periphery of the Lower Mainland, particularly Whistler. And this year it started here with the Fraser Valley and Richmond.

And now, within the Lower Mainland, it is the less desirable properties getting hit the hardest.

Those in the real estate industry tell you there will be no 'crash', just a slight correction - a 'flat market'.  Most significantly, prices will not come down.

But if there is no danger of that happening... why is CAAMP going to Ottawa to lobby for a return to loose mortgage regulations?

The answer is simple... for the bubble to grow there has to be access to easy credit.  Without it, the market will continue to wither.

(And for those who are frustrated at the slow pace of the decline, tomorrow we will hi-light how the pace of that decline has been more significant than most realize)

Real estate agents know the reality of this situation.  And once again, it is Richmond agent James Wong who succinctly summarizes the situation.

As Wong notes, the decline in listings is not a sign the market is strengthening... it is expected at this time of year:

The improvement in the Months-of-inventory (MOI) in Richmond from 12 months to 10 months was due to the 10% reduction in total listings. Many sellers either pulled their listings off the market or allowed their homes expired. The decline in listings is expected to continue for December. Seasonally this is not the time for home sellers to list their homes for sale.

 Sales are still abysmal and any sales that occur, happened because sellers cut their prices:

Sales in Richmond for November at 207 homes were slightly lower than the previously month sales of 225 units. Price discounting continued as motivated sellers tried to attract buyers. 

Will sales improve in the new year?

Many people in the real estate industry are hopeful that home sales will improve after January, 2013. An up-stick in sales can be expected in spring next year, but the overall market sentiment will likely remain subdued.

And why will it be subdued?

There is a marked difference for 2013 and 2012 as the number of active listings at the beginning of 2012 was around 1,655. The supply in 2013 is expected to take off from a higher base at around 1,950 homes by January 01, 2013. Many more new listings are expected to be added to the market after the new year.

What will the flood of listings do to the market?

The large number of listings in Richmond will result in more sellers lowering their prices to sell their homes. Current market sentiment is not expected to change much. Buying activities are likely to remain subdued. Many homes in Richmond are expected to sell below their city assessment values.

More price erosion can be expected as many home buyers are expected to stay on the sideline. Majority of these buyers know that it is to their advantage to wait for the market to continue its correction. Buyers when making offers, typically test sellers’ motivation by making low ball offers.

Why all the low ball offers?

The market situation for Richmond detached homes remained depressed. There are currently 540 homes for sale at prices above $1,000,000. With average past 3 months sale around 33 homes, the MOI is at 16.36 months.

This is a slight improvement from 17.88 months in October, partly due to expiry and 10 homes reducing their prices to below $1,000,000. There are 293 homes over $1,500,000 in Richmond. At an average sale pace of 12 homes the past 3 months, this translates into 24.42 months of supply.

2013 will be another difficult year for Richmond.

Wong summarizes exactly what the problem is... a problem CAAMP is also worried about:

The absence of home buyers, dampened market sentiment, and tightened lending rules are expected to continue into 2013.

The current MOI though better than the past 2 months, will likely be reversed when more new listings hit the market the next few weeks.

There are no signs of the Government changing or relaxing the current lending directives to Canadian Banks. Richmond’s market for 2013 is expected to have persistently high number of homes for sale and below average buying interest.

All of which is adding up to create the perfect storm in 2013... a reality real estate insiders are privately very afraid of.

Speaking of dealing with the current market dynamics, have you seen real estate agent Owen Bigland's reality check for seller's when it comes to listing you home for sale in today's market?

(video posted 2 days ago):

"Let's talk about pricing. One of the biggest mistakes people make, or seller's make, is they price the home according to their needs as opposed to what the market is dictating.

In other words they say we paid $800,000 for the home 3 years ago, we need to net $800,000 today.

Well, unfortunately, the market doesn't work that way. A home is priced based on the current fundamentals."

And the current fundamentals say you need to lower your expectations. What a paradigm shift from only 12 months ago.

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Richmond real estate agent gives us "the facts"

Diligent readers of this blog know what the real estate situation is like in Richmond right now... it's abysmal.

The latest monthly update from real estate agent James Wong leaves no doubt: a real estate downturn is in motion and that values are going to keep dropping. Dropping dramatically for that matter, to the point where owning a home makes fiscal sense again.

And that's one hell of a drop.

Richmond detached home sales have all but evaporated and most homes are selling below assessed value, some as much as 25% below assessed value... with no end in sight to plunging prices.

Buyers, it seems, are staying away in droves; afraid of catching a falling knife.

But have no fear, says another Richmond agent. Meet Owen Bigland.

Bigland wants to encourage to you to buy in Richmond. He wants you to learn from Warren Buffet and "be greedy when others are fearful and be fearful when others are greedy".

(mind you... I'm not aware of Buffet buying in Richmond right now so I say do EXACTLY what Buffet is doing in Richmond, but I digress)

Bigland, you see, has been very busy these past six weeks, so busy he hasn't had time to get a haircut...  yes, he tells us this (no offense Owen, we don't care).

Bigland informs us up front; October 2012 has been part of one of the slowest summer's on record for real estate sales.

(actually bloggers will tell you October has been a little busier than expected, but hey - this is Owen's story and he hasn't sold squat this month.  Perspective, I guess)

Bigland's brokerage, MacDonald Realty Westnar (which Owen claims is one of the biggest in the Lower Mainland with 175 agents), has had the slowest summer in over a decade.

Bigland has a number of listings he's getting little or no phone calls on, others that are getting a lot of viewings on, but buyers are

"hesitant and scared and... there's just so much news out there right now... there's just no urgency right now.  They (buyers) just figure, lets wait and see, I think prices are still going to be coming down a bit... and we'll play accordingly."

Gee Owen... sounds like buyers are playing it quite smart to me.  Do you disagree?

Of course he does (no commissions coming in, I guess).  Owen wants to share his insights but presumably he doesn't want to come right out and say "buy now you cheap bastards", so Bigland tells us he:

"won't sugarcoat it, won't put my spin on it, I just tell the facts" 

Oh?... another James Wong in the making? Ok Owen... tell us the facts:

"Ok... here's one more where I'm just going to tell the facts. And I tell ya what I had happen in September and the sales that I did. I know I'm going to get some flack, people are going to make some comments on my youtube page here, telling me you sound like a typical realtor, you sound like what they teach you in real estate school, it's always a good time to buy, and it's always a good time to sell. There's a lot of negative people out there, for sure. I've got news for you, I don't really care. I'm not really interested in doing business with negative people, I've got plenty of clients that trust me, uhhh, they know I'm going to do a good job for them, they know I take my job seriously. So here we go with it."

Blink! Blink!

Ok... fact #1. Sales suck right now and Owen just spent two minutes telling us he is, in fact, your typical realtor.

Do go on:

"In September I had two substantial sales, these were million dollar plus sales, one approaching close to two million dollars. Now these buyers, these two buyers, have a lot of things in common. And I thought I'd share it with you because maybe we can learn something from this."

Err... that there are still idiots out there with more credit than brains which puts commissions in your pocket?

Incredibly all this self-absorbed blathering takes up the first half of Bigland's 5 minute video clip. Bigland then tells you a tale where two older rich guys, who were hesitant to buy, pulled the trigger and bought. They bought because... wait for it... it's always a good time to buy and if they waited they might have lost the opportunity.

(Surprise! I think we call that 'buy now or be priced out forever')

Ummm... thanks Owen. Glad we got the 'facts' straight.

Not that I want to appear negative, but these aren't 'facts' and despite your update - I have a feeling you'll have lots of time for that haircut now.

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