A few random thoughts...

Some interesting stats sent to me today.

There are currently:

1030 Detached homes for sale in the Westside of Vancouver

697 Detached homes for sale in the Eastside of Vancouver

1164 Detached homes for sale in Richmond

Wow.

Reading the newspapers on the weekend, I couldn't help but wonder how many of those detached homeowners with houses languishing on the market are seniors?

Particularly since, as the Province newspaper notes, the fastest-growing segment of society going broke in Canada is people over the age of 55. They have acquired the nickname grandpa debtors.

According to the article the number of debtors 55 and over has grown to the point where BC's largest bankruptcy trustee, who focuses exclusively on consumer and small-business insolvency, says that the number of grandpa debtors in the Lower Mainland has exploded.

Debtors aged 65 and older who are working on bankruptcy or consumer proposals has soared by 217% from 2009 to 2011.

The numbers are almost as high for those over 50: age 60 and up jumped 193%; 50 and over climbed 166%.

These people are just the tip of the grandpa debtor iceberg, the firm says. The numbers of older insolvents will continue to grow, fuelled by easy credit and misfortune.

So you have to wonder? How many are desperate to sell their house to address their financial situation?

It's an interesting backdrop to the current market.

And here's another backdrop from the weekend papers.

The Globe and Mail ran an intriguing story on Federal Defence Minister Peter MacKay's Iranian born wife.

She is frustrated with the Toronto-Dominion Bank for abruptly closing bank accounts and cutting off mortgages that belong to Iranians who live in Canada.

Apparently TD was complying with the federal Special Economic Measures (Iran) Regulations that prohibit the provision of any financial or financial-related service to or for the benefit of a person who is in Iran, or is a national of Iran who does not ordinarily reside in Canada.

Over the past few months, TD has mailed many letters to people who fit this bill – whether or not they are full Canadian citizens or residents – informing them that their accounts must be closed immediately and that their mortgages must be quickly repaid.

The item that caught me attention here is how TD was basically calling in home mortgages... demanding immediate payment in full.

Now there's a concept that should send a chill down the spine of every mortgage holder in the country.

I couldn't help but ruminate on the juxtaposition of these three separate items.

A stagnating market, waves of seniors in serious financial trouble, and evidence that banks can still - and will - turn mortgages into demand loans.

The storm clouds gather.

And the potential for catastrophe grows.

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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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Wall Street Journal picks up on Rosenberg's analysis of Canadian Housing Market

The Wall Street Journal is picking up on Gluskin Sheff economist David Rosenberg's recent analysis about the Canadian Housing Market.

In case you missed it, yesterday the Financial Post covered Rosenberg's analysis that Canadian housing prices are not sustainable.

Jumping on the story, the Journal headlines: Bubble vs. Rubble? Rosenberg Weighs in on Canada-U.S. Housing Divide.

Many economists balk at using the “B-word” to describe Canada’s housing market. Gluskin/Sheff’s David Rosenberg doesn’t.

And remember, he was the guy who called the U.S. housing bubble.

In a report out this week, Mr. Rosenberg describes the different real-estate market landscapes on either side of the Canada-U.S. border–”bubble versus the rubble.”

Rosenberg is highly respected in the United States as an economist who pulls no punches and he gained a high profile in financial markets when as the chief economist of Merrill Lynch he rang some early warning bells on the housing market crisis and subsequent recession in the U.S.

Mr. Rosenberg’s message now: Housing prices in Canada and the U.S. have never been this polarized, with Canada’s prices on average twice that south of the border. Historically, they have been close to parity, he says, and they can’t stay this far apart forever.

Toronto and Vancouver are “undeniably desirable places to live,” but that doesn’t mean that prices in Vancouver should be 4.4 times above the U.S. average, and Toronto three times higher.

Activity in the Canadian market should cool off, with condo sales vulnerable to a 20% drop in hot spots like Vancouver and Toronto. And another tightening of Canadian mortgage rules—which went into effect this week–is sure to bite into demand.

Our friends over on VREAA have summarized Rosenberg's report and his comparative graphs.

If there was any doubt before, you can't ignore it now. The word is out across America and the world about our housing bubble and that a crash is not only imminent, but expected.

Rosenberg summarizes the situation succinctly by declaring; “Not sustainable, my friends.”

Wasn't it Tsur Sommerville who insisted that wealth would continue to pour into Vancouver to support our housing prices?

I wonder if the Sauder School of Business will come out with a report analysing how wealth ignores the evidence when making investment decisions.

I mean, don't they already believe fundamentals don't apply?

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Sub Million Dollar homes for sale on Vancouver's West Side

With the new mortgage rules, which came into effect on July 9th, we now have a situation where CMHC insurance will no longer insure homes in excess of $1 million.

Not too long ago you couldn't find any detached single family homes listed for sale on the West Side of Vancouver for under $1 million.

Will the new regulations change that?

Above is a screen shot of the MLS taken this evening.

The map isn't empty... six lowly dots now appear on the screen (two of which are lease properties on Musqueam land).

It will be interesting to chart what sort of changes the real estate landscape creates as the year moves along.

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The connection between the manipulation of LIBOR and the manipulation of Gold/Silver raised on CNBC

Yesterday we introduced you to the LIBOR scandal.

What was exposed is the fact that the benchmark interest rate, which is set in London by a small group of relatively unknown individuals... which affects wealth as a benchmark of value around the world... a benchmark tracked by the US Federal Reserve and the financial system, has been exposed to have been subject to manipulation by some of the big Banks, with the silent acquiescence of the government and their central banks.

This, as faithful readers know, is exactly what is alleged to be occurring in the Gold and Silver markets.

And with the revelations by Barclay's of their involvement in LIBOR (a market estimated to be as large as $800 Trillion dollars), how long before it is revealed that the EXACT same manipulation is going on in the Gold and Silver markets?

Today that very topic was raised on CNBC.

Gold and Silver manipulation is no longer the preserve of the tin foil hat brigade.

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Sun Post #2: Australian financial experts warn of 'depreciation time bomb' of negative equity

Ever since the 2008 Financial Crisis, two countries have seemed to lead a charmed existence and evaded the world wide credit/housing implosion.

They were Australia and Canada.

Bullish proponents who claim things were different in Canada always pointed to Australia as another example of how a sound banking system and Asian investment were proof that our nation would escape the implosion of a 'supposed' housing bubble.

But as we have covered on this blog numerous times, Australia is starting to see it's bubble implode.

The latest missive from the Land of OZ heralds that Home owners are facing loan repayment disaster. And one has to wonder... is this a preview of what's to come in the Lower Mainland.

Many people who bought houses on Melbourne's fringes in recent years could be facing financial ruin after a slump in prices has left them owing more to the bank than their homes are worth, experts have warned... (this has) led some financial experts to warn of a 'depreciation time bomb' of negative equity for home owners in fringe suburbs, who owe more to the bank than the value of their homes... there is a risk that some purchase decisions that were made on the expectation of higher long-run average growth rates may have to be reassessed.

In Australia, as in Canada, many young buyers have been enticed into the market with emergency level interest rates since 2008.

Kevin Bailey, principal at Shadforth Financial Group, said his warnings three years ago of a ''homegrown subprime crisis'', created in part by inflationary first home buyer incentives, are now playing out. He said the schemes enticed mostly young people, without savings, to borrow heavily and pay a premium for low quality housing in poorly serviced locations.

Sound familiar?

Bailey also goes on to say:

"Lots of baby boomer parents who have made money out of property gave sage advice to children to pour their money into bricks and mortar because prices double every seven to 10 years Young people who were sold that lie will find it very difficult to escape and it's a tragedy."

The reality is that both Canada and Australia merely delayed the inevitable with their interest rate policies.

What we read is happening in Melbourne is merely prologue for the Lower Mainland.

Will we see articles like this in the Sun or the Province by the New Year?

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Sun Post #1: The LIBOR scandal

The average person is completely unaware of what the LIBOR scandal is.

Your basic, ordinary investor spends enough of this time simply trying to understand the basics of investing. When it comes to getting a handle on the myriad of acronyms in the investing world... well forget that.

So it's easy to dismiss the recent scandal involving allegations that Barclays took steps to rig what's known as the LIBOR.

But don't walk away with the mistaken impression that LIBOR isn't important for average people. As millions of people are about to find out, nothing could be further from the truth.

LIBOR stands for "London Interbank Offered Rate" and actually refers to more than 150 different rates. You can find LIBOR figures for a variety of maturities between a single day and a full year in each of 10 different currencies, including the U.S. dollar, the British pound, the euro, and the Japanese yen.

The calculation of LIBOR is simple.

Every day just before 11 a.m. London time, Thomson Reuters, which is the designated calculation agent for the benchmarks, receives information from the LIBOR contributor banks asking them at what rate they'd be able to borrow funds from other banks. It then calculates the appropriate LIBOR by looking at all the rates submitted, tossing out the top quarter and the bottom quarter, and then taking the average of the remaining figures. So if 12 banks submitted figures for a particular rate, the LIBOR would be the average of the middle six after eliminating the top three and bottom three.

LIBOR has a direct impact on many people. Those who have adjustable-rate mortgages often have their rates tied to an appropriate LIBOR benchmark, with mortgage rate resets based on changes in the LIBOR over time. Add in credit cards, car loans, and other credit, and the British Bankers' Association estimates that roughly $10 trillion in loans base their rates on LIBOR.

As much as LIBOR influences ordinary people's lives, the much larger impact comes from the financial markets. LIBOR figures are used for an estimated $350 trillion in notional value of credit-default and interest-rate swaps. For instance, both Annaly Capital and American Capital Agency hedge their extensive borrowings using swaps tied to LIBOR. All told, more than $800 trillion in loans, securities, and notional derivative contracts has links to LIBOR. Those securities include interest-paying investments which pension funds and other institutional investors own, making for an indirect impact on tens of millions of workers and retirees.

This week the former CEO of Barclays said that banks across the world were fixing interest rates in the run-up to the financial crisis.

Professor of economics and law Bill Black summarizes the issue succinctly:

It is the largest rigging of prices in the history of the world by many orders of magnitude.

Indeed. And since the scandal effects an $800 trillion dollar market – 10 times the size of the real world economy - the impact could be profound.

In the youtube clip above, Matt Taibbi explains the significance:

this is the “mega scandal of all mega scandals”, because Libor is the sun at the center of the financial universe”, and manipulating Libor means that “the whole Earth is built on quicksand.

As much as LIBOR influences ordinary people's lives, the much larger impact comes from the financial markets. LIBOR figures are used for an estimated $350 trillion in notional value of credit-default and interest-rate swaps. For instance, both Annaly Capital and American Capital Agency hedge their extensive borrowings using swaps tied to LIBOR.

All told, more than $800 trillion in loans, securities, and notional derivative contracts has links to LIBOR. Those securities include interest-paying investments which pension funds and other institutional investors own, making for an indirect impact on tens of millions of workers and retirees.

Because of the pervasive use of LIBOR, the benchmarks take on huge importance not only in the interest rate market, but throughout the financial world. During the financial crisis four years ago, when LIBOR soared well above the prevailing Fed funds rate set by the Federal Reserve, analysts concluded that the credit markets had come to a screeching halt with banks afraid to lend to each other. Similarly, during flights to safety that push rates on Treasury bills to artificially low levels, LIBOR serves as another gauge that can provide a different perspective on the credit markets.

Credit card holders, students, local governments, small businesses, small investors and virtually everyone else in the entire world has been impacted by the manipulation.

This is the biggest financial scam in the history of the world.

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A real estate news story made to order?

On Thursday we told you how Eugene Klein, president of Real Estate Board of Greater Vancouver (REBGV), was perplexed.

On July 9th (only two days from now) insured 30-year amortizations will be a thing of the past.

And as the Globe and Mail newspaper noted, Mr. Klein was disappointed that he had not seen the expected rush of activity from some buyers eager to get into owning a home prior to the changes taking effect;

“We thought (we) would see a fervour of activity from people trying to get in under the line of the due date, but members haven’t been telling us that that’s the case. So we don’t know if the information is really out there, if consumers really understand it.”

Well... if they don't understand, best to get the word out then.

And in the time-worn fashion of manipulation that now characterizes the mainstream media/real estate industry relationship, we are suddenly treated to story telling us the exact opposite of what Klein claimed was going on in the market... and just so happens to promote precisely what he wished was happening.

It is exactly the type of manipulation that infuriates so many who watch real estate in this city.

You can almost envision how it plays out.

After lamenting what isn't happening, a story is crafted about a couple who learns of the impending mortgage changes, the story is packaged up, sent to a news reporter contact, and... lo and behold... the media eats it up and we are presented with a profile of couple who scrambles to buy before they are priced out by the new mortgage rules.

... with the underlying message that you might be missing out if you aren't doing the same.

Yesterday it was CBC news who appears to be playing the media patsy.

In a story titled "Home buyers scramble before mortgage rules change: just 2 days remain in which 30-year amortizations will be allowed", we follow Bruce and Denise Perrett, of Port Coquitlam, B.C.

We are told they got married last year and wanted to buy a house, but they weren’t in a rush. That all changed when the couple heard Ottawa was tightening mortgage rules.

CBC profiles how they "sprang into action and called their mortgage broker," got mortgage approval and beat deadline stress!

The Perretts spent 48 hours looking at homes and put an offer that was accepted last week on a property in Maple Ridge that has everything they want.

The best part is that they qualify for a 30-year mortgage.

“We probably wouldn't have been able to afford to mortgage a house, or at least not the house we wanted, if we hadn't jumped on it,” Bruce Perrett said.

On Thursday REBGV President Eugene Klein was fretting that young buyers weren't being sucked into the pressures of beating the mortgage deadlines and buying real estate.

Then he lamented that perhaps his industry wasn't getting the word out to the public about what they needed to do.

Suddenly, the very next day, a story appears in the media promoting EXACTLY what Klein wanted to see.

Riiight.

I wonder how many gullible couples will actually be suckered in by these types of tactics over the next two days?

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Fri Post #2: "It's just how it is!"

Interesting housing story over on CTV.  You can click here to see the clip.

The segment is titled 'Generation Squeezed' and it profiles a young family who question whether they will ever be able to own a home in Vancouver.

28 year old Derek Atkinson is interviewed.

Derek and his wife have a combined income that would allow them to buy a $500,000 home but a minimum 5% down would require a downpayment of $25,000.

The problem is, saving up $25,000 will take as much as six years... and that's a stumbling block.

But the Atkinsons are privileged. CTV tells us the average family only makes $67,000 per year, enough to qualify for just a $300,000 mortgage... and in Vancouver $300,000  doesn't go very far.

It prompts CTV to ask, "do young Vancouver couples have a right to home ownership in the City they grew up in?"

Which brings us to Tom Davidoff from the UBC Sauder School of Business.

Davidoff tells us;

"There's not going to be any free lunch in the Vancouver.  There's not going to be any free lunch to own a home in the most Beautiful Place on Earth... so I think people need to be prepared they are just going to have to accept that reality."

CTV then drops another great stat. Average household incomes are no higher today than they were in the 1970s. And with those stalled incomes they need to pay for those housing prices which have gone up 76% across the country and almost 150% right here in BC.

CTV concludes that it all adds up to a growing sense of frustration and hopelessness for an entire generation of Canadians like the Atkinson's.

The story closes as Atkinson says;

"it is just a big challenge... you know... right now you just get resigned to it... it's just... how it is."

It's just how it is... that's the message.

This... after a week long orgy of doom and gloom about real estate and the potential for a collapse in housing prices?

Interesting.

More on this later on the weekend.

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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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Thurs Post #2: In Vancouver, "something has affected the psychology"

News media stories on the abysmal June 2012 real estate sales data continue.

The Globe and Mail is out with an article titled, "In Vancouver, the seller's market recedes."

The Globe tells us that prices in Vancouver, the country’s most-expensive real estate market, remain stable... but activity has dropped sharply. They also note that economists welcome the decline in sales as an early sign that a correction is taking root, and said prices are likely to follow suit.

But what caught your faithful scribes eye, was an examination of the public's current mindset.

While there is anecdotal evidence that foreign investors are losing their appetite for real estate in the Vancouver, experts remain perplexed as to exactly why the city is seeing such a decline in transactions right now.

Toronto-Dominion Bank deputy chief economist Derek Burleton, who is calling for price declines of at least 15 per cent in both Vancouver and Toronto... (says) Vancouver’s slowdown is “striking, because nothing has really fundamentally changed in the market. It’s hard to pinpoint. Something has affected the psychology."

You don't think that 'psychology' might be the fact that people are beginning to understand that we are in a real estate bubble, after all?

Perhaps this explains another element of our current market which is confounding the 'experts.'

Eugene Klein, president of Real Estate Board of Greater Vancouver (REBGV), is perplexed in the days leading up to the changes in the the maximum length of insured mortgages from 30 years to 25.

The Globe notes Mr. Klein said he expected to see indications of a rush in activity prior to the changes taking effect, but hasn’t seen any so far.

“We thought that people would see a fervour of activity from people trying to get in under the line of the due date, but members haven’t been telling us that that’s the case. So we don’t know if the information is really out there, if consumers really understand it.”

Perhaps the problem is that they do understand it all too well.

Now who do you suppose might be responsible for that? Perhaps Bob Rennie has an opinion.

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Thurs Post #1: BC Real Estate Association declares, "there will be no price drops" - CBC

 

So CBC-TV ran a story yesterday titled "Vancouver home sales drop sharply in June" and is embedded above for your viewing pleasure. The central theme of CBC's piece is to determine if we will see lower real estate prices. Check out the very last portion of the story where the reporter closes by stating:

"So does all of this supply mean there are going to be bargains? An economist at the BC Real Estate Association says 'NO', that the price drops of 3.5% earlier this year are going to stay there."

It would appear the BC Real Estate Association is drawing a line in the sand on all this talk about a 'depressed' market and declining prices by declaring it simply won't happen. Contrast this with realtor Keith Roy who yesterday told his clients that, not only had he sold his house, but he was recommending that now is the time to "cash out" and sell your home. More significantly Roy said:

"if the media picks up on this story, you can be sure the rest of the market will follow the west side (with declining sales and exploding inventory)."

Well it certainly seems the BCREA is moving to quash this very outcome. After going through all that work to redefine the way the HPI benchmark price is calculated (twice this year, actually), it's clear they will brook no perceptions that house prices will go down.

You have to wonder how long before Roy receives a 'snot-a-gram' from the BCREA about his advice to clients.

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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

____________________________________

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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Wed Post #2: June sales data forces declaration of 'buyers market'.

As noted in today's Vancouver Sun, the number of residential property sales has hit a 10-year low in Metro Vancouver leading the Real Estate Board of Greater Vancouver (REBGV) to declare a buyer’s market.

But even with another month of declining sales, rising listings plus an average detached house price that has DROPPED 14% in just four months... the REBGV gleefully headlines (and the Vancouver sun obliges) that the Benchmark price for detached properties has INCREASED 3.3% from June 2011 to $961,600

To think, it only took two changes to way the HPI Benchmark price is calculated in 2012 to pull this rabbit out of the hat... ain't statistics grand?

The Vancouver Sun notes that this recent REBGV announcement is significant since the board has in recent months been calling the market “balanced.”

How painful was it for the REBGV to bring itself the make this declaration?

Of course this is the same REBGV which Vancouver Sun columnist Pete McMartin recently observed:

would have viewed the crash of the Hindenburg as the result of “normal deflationary conditions.”

According to the REBGV’s June report, sales of houses and apartments dropped to 2,362 last month, a 27.6% decline compared with 3,262 sales in June 2011, and a 17.2% drop from just last month.

The ugly truth is that June sales were, in many categories, the lowest totals for the month in the region since records started being kept in 1995 and 32.2% below the 10-year June sales average of 3,484.

Even Global TV was recently moved to call the Vancouver market 'depressed".

If it's a buyer's market, why aren't homes selling?

You just can't put lipstick on this one.

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Wed Post #1: Happy Independence Day

To our American friends for visit today, a happy 4th to all!

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Tues Post #2: Total Vancouver Inventory drops 812 listings

Did the market stumble today?

Total inventory dropped dramatically. And despite 300 new listings today, we still ended up with a net decrease of -812 from our total inventory.

Is the market turning around?

The fact of the matter is there were still 188 more listings than sales. The Vancouver market continued it's trend wherein every single day this year we have seen more listings than sales.

So why the big drop?

If you look back at the way inventory ballooned in Feb/March, it should not be so surprising that as the first of the month arrives, massive numbers of listings are expiring.

And because of all those expirations, the first business day of July will post the smallest month-to-month gain we have seen yet this year.

So now the big question.

Will all those seller's who didn't realist today survey the market and hold off on re-listing until fall - after the summer sales slump? 

Or will they see the shifting sands and put their homes back on the market within a couple of days?

Over the next few days we will hear press reports about just how bad June's sales data is.

As noted over on Vancouver Condo Info today, detached home sales in some areas were the worst in 15 years.

Here is the data from Richmond compared to the last 17 years

1995 = 112

1996 = 114

1997 = 144

1998 = 105

1999 = 135

2000 = 128

2001 = 160

2002 = 139

2003 = 166

2004 = 147

2005 = 248

2006 = 170

2007 = 198

2008 = 115

2009 = 204

2010 = 139

2011 = 158

2012 = 73 **June 28

From the West Side of Vancouver

995 = 108

1996 = 133

1997 = 140

1998 = 126

1999 = 152

2000 = 125

2001 = 189

2002 = 150

2003 = 180

2004 = 154

2005 = 185

2006 = 181

2007 = 177

2008 = 108

2009 = 200

2010 = 147

2011 = 213

2012 = 99 **June 28

And from the East Side of Vancouver

1995 = 145

1996 = 175

1997 = 185

1998 = 136

1999 = 233

2000 = 185

2001 = 269

2002 = 203

2003 = 282

2004 = 243

2005 = 303

2006 = 396

2007 = 244

2008 = 139

2009 = 238

2010 = 145

2011 = 180

2012 = 107 ***June 29

(hat tip Inventory for the figures)

Sales have been the lowest in 17 years.

So as you can see, seller's have a giant dilemma facing them.

Pull their homes off the market or realist?

July/August should be interesting months as we watch the market unfold.

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Tues Post #1: R.I.P. Mr. Griffith

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Mon Post #2: Remember our 20,000 prediction listings contest?

Back on May 9th, when inventory was cracking 18,000, all indications were that the Vancouver market  was moving resolutely to the psychologically significant 20,000 mark.

So we decided to have some fun with it and invited bold souls to venture predictions as to when (if) we would crack the 20,000 mark.

On Friday we were sitting at the 19,630.

Will be crack it later this month?  July has historically been a time where listings have been pulled for the summer, so we shall see.

Below are most of the guesses submitted.  Who will be closest?

______________________

May 28
Farmer

May 29
RumbleGuts

May 30
Jen

June 1
Sockeye
BoneShaft

June 2
Terminal City Girl

June 3
Nick-Vancouver

June 4
Robert (Maple Ridge)
Ash

June 5
Michael J - Vancouver

June 6
V

June 8
Alpha_Bear

June 11th

TCG

June 12th
Peter

June 13th

Ryan

June 15
another value investor

June 18

Grrr, Rob___

June 20
MolestoTheClown

June 21
Summer Solstice! (buffates)

June 25

Duran

June 29
anobserver

July 1
Steve

July 7

Josh

July 11
GG

July 17
A Political Junkie

July 25
Alexander

20,000 won't be achieved
kman


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