Cameron calls a bottom

The Chief Pumper at the BC Real Estate Association is calling it the bottom over in Nanaimo today. Shilling in the Nanaimo Daily News, Cameron says:

"This is the second month, seasonally adjusted, we see a rising trend in consumer demand," said Cameron Muir, B.C. Real Estate Association chief economist. "I'm calling this a transition year. I think we're about to embark on another upswing."

Happy days are here again?

Never mind that every other market in the Island region, save Port Alberni, saw average selling prices decline.  In popular Parksville, they fell by as much as 6%.

We're in a transition to rising prices?... Woohoo!

Back on the mainland, rational realtors don't seem to share Muir's enthusiasm.

While west side realtor Sam Wyatt is also reporting an uptick in sales...

Months of Inventory (MOI) fell to 5 months for Vancouver detached homes. It remained at, and fell to under 5 months for attached homes and apartments respectively.

Vancouver real estate is now back to the MOI levels of last spring. I was pleasantly surprised that May was a such a good month for sales volumes for both my clients and the Vancouver market. Those sales volumes are what helped drive down the MOI in spite of high volumes of active listings.

... he doesn't view this as a springboard to a market surge:

Sales volumes generally peak in the Spring so it is likely that May will be the high point for the year (though I said that about March). May's real estate sales are comparable to May of last year but the trend to lower volumes of sales remains apparent. Unlike sales volumes, active listings don't typically peak until mid summer so It will be very interesting to see whether sales remain strong and listing volumes drop over the next few months. I will be surprised if either is the case.

Sounds like a rough transition, Cam.

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Ready, Set, A New Year Begins

So we enter 2013 with a massive wave of expired listings.

Today gave way to a total inventory drop of -2,103.

It means Vancouver Inventory starts off 2013 at 11,789.  In 2012 we started off with 10,671. So 2013 comes in just over 1,000 listings higher.

Of course these numbers represent Vancouver Inventory.  Realtor Larry Yatkowsky provides us with this graph of Greater Vancouver Inventory comparing the start of 2013 with 2012 and 2011:

Perhaps the most striking element that stands out is the way listings dramatically drop off from the last week of October to the end of the year in each of the 3 years.

The other most striking element is how much higher those listings are at this time compared to 2010/11 - about 35% higher.

Of course now the fun begins.  In the next week or so listings will start to flood in in preparation for the Spring market.  Looking at the graph above 2012 was almost a carbon copy of 2011,  only with much higher numbers.

Will 2013 climb over 2012's back the way 2012 climbed over 2011?

Vancouver Westside realtor Sam Wyatt reports that there are currently 700 listings of properties for sale over $1 million. In December there were a mere 49 sales – or 14 months of inventory - and this before the spring market surge comes.

Says Wyatt:

Months of inventory will continue its upward trend and prices will continue to fall. My prediction: the average SFH in Van will drop back to 2010 prices by March or April. And lots more to come after that.

Which brings us to our first property profile of 2013.

This is 3963 W. 22nd Avenue:

This 4 bedroom, 3 bathroom, 2,338 square foot home is currently assessed at $1,478,500.

Interestingly it was purchased on February 21, 2012 for $1,805,000 (see BC Assessment above - click to enlarge).

Clearly purchased to flip (or develop), it is another example of a speculator bailing before the drop begins in earnest.  And lucky for him he found a buyer.  The house sold for $1,580,000 today (hat tip gse36 on RET).

It's a curious contrast.

The seller lost 12.5% (not including transaction fees), but the property still sold for above assessment.

Is it a fatal buying mistake?  Or a bold move in advance of a new spring boom?

A New Year begins.

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One simple message right now: Pull the Boomer Trigger... before it's too late.

So for the past two days we have focused on Richmond real estate agent James Wong and his stunning assessment of where the real estate market is going.

Whether or not you question if the graph he originally posted (showing average prices cascading down 70%) was an accurate assessment of where he thinks the market will end up, his assessment on the state of the market is clear and precise:

If home sales and prices continue to slide, it could take many years before the market stabilizes. 

Judging from the huge run up in home prices, the drop in prices on the way down could be just as severe. A market correction will take many years to reach a level when home buyers feel comfortable again to enter the market. 

We are now witnessing the unwinding of the housing market. The severity and pace of price decline are dependant on the interaction of buyers and sellers perception of the market. At current price point, getting financing for a family earning $65,000 a year with 5% down payment will allow the buyer to afford a home valued at $294,000. 

It will take many years before owning a home makes sense again. Home prices are not going up now or holding. Instead, the housing market is coming down in value. The rush to exit the market will take its toll on sellers who bought their homes recently.

One thing we didn't cover in the past two posts is his October market report that outlined the end of September sales statistics for Richmond.

Wong's conclusion at the end of it all is clear: if you want to sell, you need to cut your asking price significantly below current assessed value:

September home sales in Richmond did not reverse the low sales the preceding months in July and August. 

With total sales of 173 homes, September home sales in Richmond turned out to be worst than the previous month sales of 179 homes. 

Active listings for detached homes, townhomes and condos/apartments in Richmond at the end of September, 2012 totalled 2,663 units, was at about the same level in August, 2012. 

The lack of buying interest was the main cause for slumping home sales in Richmond. In spite of some aggressive discounting by home sellers, buyers were not motivated to make their purchases. 

The supply and demand for homes in Richmond deteriorated further in September, reaching 14.09 months compared to the previous month’s ratio of 12.51 months of supply. 

Richmond real estate market outlook 

Market sentiment has deteriorated further... The only way out for sellers who are determined to sell was to price their home more aggressively. Sellers who are taking deep cuts in reducing their selling prices are likely to sell their homes. Many homes that were priced according to the market, failed to generate much interest from buyers. 

In the next 3 months, home sellers are likely to either pull their listings or allow them to go expired. Richmond detached homes are expected to suffer the most in price erosion. 

Richmond detached homes over $1,000,000 are not seeing much buying interest. With total active listings of 686 and average sale around 28 homes the past 3 months, there are 24.5 months supply of homes in the market. 

For detached homes over $1,500,000, there are currently 353 homes for sale. With an average past 3 months sale of 12 homes, this translates into 29 months supply of homes. 

The decline in housing sales and home prices in Richmond will take many years to play out.

You get the feeling Wong will be the hit of the Christmas holiday house party circuit this year.

But it's not just James Wong who is bringing us the hard uncomfortable truth of the current real estate market. Vancouver West Side real estate agent Sam Wyatt is out with his October market report as well,

And judging from the title (October Real Estate Update: Attached and Condos Feel the Chill), you get the impression Wyatt isn't gunning for the Tony Robbins R/E Positivism Award either.

In fact Wyatt's message is remarkably similar to Wong's... if you want to sell, cut your asking price and make it a DEEP cut:

For the first time in over 6 months, the Months of Inventory (MOI) metric for Westside Vancouver houses dropped slightly. It had risen from 4.39 in February to 13.27 in August and in September sat at 12.14. 

The big news for September is that both attached homes and apartments rose again, now to over 10 months of inventory. It might be that Months of Inventory has crested for detached homes but my sense is that it is still likely to get worse. 

There were 86 houses sold on the Westside in September which is up from 75 in August but such a paltry number of sales can hardly be considered an improvement. 

Even as sales improved, active listings increased from 995 in August to 1044 in September. 

The average price of detached homes fell to $2,259,214. 

Apartments and attached homes are now really beginning to feel the chill of this falling market. With MOI over 10 months for each of these home types, we can expect to see prices fall. 

In fact, the average price of an attached westside home has fallen to its lowest point since June of 2009 to $749,668. 

Sales success ratios for the westside are still only about 30% which means that the vast majority of listings fail to sell. If you want to sell, you will need to price BELOW the most recent comparable sales prices and you need to do this from the very beginning of the listing. If you don't do this, your listing will almost certainly stagnate. I continue to succeed in making sales happen with this technique.

Wyatt's message to those rare real estate buyers who are actively searching the market right now?

More sellers are recognizing the change in this market and beginning to negotiate in earnest.

And negotiating in earnest is the only option right now.

Those hoping for Industry pressure to reverse federal government liquidity tightening measures are bound to be highly depressed at the latest news coming out about Canadian debt levels.

Canadian households are even more in debt than anyone imagined, according to a revised Statistics Canada calculation that gives a more accurate picture of family finances. 

The revisions place household credit market debt in the second quarter at 163 per cent of disposable income, well above the previously reported 152 per cent. 

The revision shows debt growth over the last decade that looks “eerily similar to the U.S. experience, just before their dramatic housing bust,” said David Madani, an analyst with Capital Economics. 

“Overall, this supports our bearish view that Canada’s housing boom is unsustainable and the eventual correction, which we think is already underway, is likely to have a material negative implications for growth,” he said. 

The revisions show a much steeper climb, with debt growing in each of the past six quarters.

The news has TD bank economist Diana Petramala saying that the overall results show Canadian households are more vulnerable to a housing correction than previously thought.

Although Canadians hold more assets than their counterparts in the U.S. and the U.K. did before the crash, most of those assets are locked into the value of their homes, which could take a tumble in a housing correction or if the economy tanks.

So if you are a Boomer at the front of the Boomer retirement wave (with tremendous unrealized capital gains sitting in a bubbled valued piece of real estate)... what is the crystal-clear message being conveyed right now?

If you bought your property more than 20 years ago, and you have the ability the move significantly on price... DO IT!

Can you say Boomer Trigger?

(We've profiled Vancouver houses with asking prices as much as 23% below official assessed value. Let's see who can find the first with an asking price 25% or greater below assessed value)

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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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