Wednesday, July 7, 2010

I don't think 'HAM' got the memo

As previously noted, on June 12th we heard about how 'Hot Asian Money' (HAM) was maintaining property value on the west side of the City of Vancouver. Headlining the message was our buddy Cameron Muir from the BC Real Estate Association:

So here's Cameron - in the MIDDLE of the month of June - telling us 'HAM' is going to maintain property values on the west side of the city of Vancouver.

Well... lo and behold the latest Real Estate Board of Greater Vancouver (REBGV) statistics for the month of June 2010 are now out and things in June don't quite reflect Muir's appraisal of the situation..

Seems the 'Ham" didn't get the memo from Cameron.

The REBGV in June reported total sales of 2,972 which is the 2nd lowest sales total for June in the last 8 years. Only June, 2008 (when the world financial markets were imploding into the greatest credit crisis and subsequent recession since the Great Depression) had lower sales.

In addition to significant drop in sales, there has been a substantial rise in unsold inventory (17,564); it'ss double what it was 6 months ago (Jan/10).

These conditions combined to drive the overall REBGV benchmark price for all housing in all areas down by just over $10,000 from May to June.

But $10,000 is the average of all areas in Greater Vancouver combined.

On the west side of Vancouver, where all the supposed 'HAM' money was supporting real estate values, the benchmark price for detached homes dropped a significant $91,000 from May to June.

And up in toney West Vancouver, home of all the luxury properties the 'HAM' is supposed to be snapping up, the one month drop in apartment prices has been a significant 11.5% off the previous month's benchmark price.

As the blog Vancouver Condo Info notes with the clever graphic above, you could have gotten a free luxury car by waiting a month to buy.

We will see if the downward trend continues.

Brian Ripley, CEO, Oakes Ripley & Associates, certainly thinks it will. He was on BNN yesterday and not only does he think the downward trend will continue but he believes Vancouver is in for a signficant collapse.

You can see the Ripley interview here.

Meanwhile, stateside, noted American blogger Mike Shedlock (Mish's Global Economic Trend Analysis) has also taken note of these recent statistics and wrote:

"This pattern is quite similar to how things cascaded in the US once the top was in.

Housing Collapse Cascade Pattern

  • Volume drops precipitously
  • Prices soften a bit
  • Inventory levels rise slowly
  • High-end home prices remain relatively steady for a brief while longer
  • The real estate industry tries to convince everyone it's "business as usual" and homes are affordable because rates are low
  • Bubble denial kicks in with media articles everywhere touting the "fundamentals"
  • Stubborn sellers hold out for last year's prices as volume continues to shrink
  • Inventory levels reach new highs
  • Builders start offering huge incentives to clear inventory
  • Some sellers finally realize (too late) what is happening
  • Price declines hit the high-end
  • Increasingly desperate sellers get creative with incentives, offering new cars, below market interest rates, trips, etc
  • Gimmicks do not work
  • Price declines escalate sharply at all price levels
  • The Central Bank issues statements that housing is fundamentally sound
  • Prices collapse, inventory skyrockets, and builders holding inventory go bankrupt

Some of those may happen simultaneously or in a different order, but the whole mess starts with a huge plunge in volume.

I am now confident the peak in Canadian housing insanity is finally in.

- Mish"

So am I. Let's see what happens.



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