Saturday, July 14, 2012

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.



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  1. I dunno... just sounding like another realtor craving for public attention.

  2. But it's public attention focus on a topic that is slowing becoming part of the market psychology.

    And once it takes root... it's very hard to dispel.

  3. Just wait until the MSM really starts to push this message. Then the house of cards will fall. Oh man, this will be great to watch unfold! The pumpers and bulls will be eating crow for years.

  4. The market is stalled. Some REs are probably figuring there's no way to talk it up anymore; prices have been flattish for 2-3 years. Global News stories and the flying helicopter asians haven't really worked. So they figure they can talk it down. They want to get volumes going again.

  5. He and the other dude just wants to sell more houses...give them their homes to list. But it is good they are saying the market has turned and get ready for a huge drop! Lets hope this goes viral! We need a huge correction...everything from mortgages to HELOCs to interest rates to other line of credits are getting way out of hand!!!!!!! And Alberta is leading the way with those debts! "Lets keep up with the Jones!" And then in BC, "lets keep up with the Chans!" It's so true. I know people who are over spending. Why do they need RVs? Why do they need boats? Why do they need a Mercedes Benz?

  6. The acid test has arrived. If Vancouver is a true bubble then prices will drop relentlessly until they hit bottom and we see a mean reversion.

    It is difficult to imagine that Vancouver is not in bubble though. Frankly, it is in the most overpriced category already and according to the charts might even hold a record in that category.

    I agree with you other posters who are suggesting that the recent realtor defections are just a ploy to pull in fresh listings and get volume and momentum going again.

    So be it. They might make an extra buck but there is little they can do to change the direction of this tide. And there is nothing anyone else can do to stop a decline once it has started.

    All signs now point to a corrective process. If the formula follows the experience of other markets then the majority of declines will happen within the next 24 months or less.

    The descent could be even more rapid though. In Vancouver's case we are already seeing considerable price deflation and it is clear that the vast majority of people will never cash out in time to enjoy their paper gains.

    Most will follow the market right back down to the bottom because they are incapable of adjusting to changing sentiment and policy level directives. As usual, these folks turned deaf to the warnings all the way up and they will be equally deaf until they are in bankruptcy court. They are utterly ignorant on both counts.

    I wish I could be sympathetic. I am not.

  7. There isn't actually any real price deflation in Vancouver, let alone considerable price deflation. The Teranet Index or the MLS HPI which correct for the distribution of sales are basically flat (or up year over year). The skewing of sales towards high-end homes from mid-2010 to early 2011 caused a significant deviation of the average price from other measures, perhaps as much as 10-15%. No surprise that as the distribution of sales normalizes, the average price is falling. Not to say that prices won't decline slightly this year, but it isn't really happening yet.

    1. Well you are absolutely wrong, Mr. A 15% decline in single family home prices over a period of just a few months is indeed a considerable deflation.

      The HPI index meanwhile is fabricated nonsense to create the appearance that price drops are less significant than they really are.

      What is your agenda? You must be a realtor.

    2. Care to provide statistics on the change in sales distribution between high-end sales and the average home sales? That would help proving your case that HPI is a better indicator.

      On the other hand, the average price figures have been dropping (yoy) for the past few months. Are you implying that the sales distributions are skewed for all these months?

    3. An abnormal distribution of sales? Do you mean the same distribution that realtors like yourself have been using to create the impression in the publics mind that all real estate was in fact rising? Now you want to use the same data to prove everything is ok and only some parts of town are actually in decline? I cannot believe what I am reading. You guys never give up do you? As you well know, the price declines for the averages are absolute while the HPI fabrications still suggest there is a so-called balanced market (whatever that means). One thing we know about your industry is that you like to play with games with words. Happily, the jig is up and the new regulations spanked the lot of you. Hope you are enjoying your EI benefits.

  8. Its not a 15% decline over a few months, its a 15% decline compared to the same period in 2011 when, as I said, the average price was being skewed by an abnormal distribution of sales. Its statistics not conspiracy. Also, the MLS HPI has an over 90% correlation with the Scotia/Teranet index. So I guess it is also a fabrication (and so is Case-Shiller since its put together the exact same way).

    1. See my reply above your comment.

    2. Try the following exercise. Plot the average price for Vancouver against the Teranet index (you'll have to index the average price first). I'm assuming you accept the Teranet index as legitimate. Then tell me there is nothing odd happening with the average. I'll wait.

  9. It appears bored Realtor(R) apologists are now frequenting this site?

  10. Great post today on:

    1. Agree, that was a great post. So the high flying birds are finally coming back down to earth. Thirty three percent declines are notable but won't be the worst by the time this is over. That is only half way to where it is going in the end. The Realturkeys(R) just cannot spin this anymore. Is it really a surprize they have suddenly shown up to argue with us again after all this time? Poor buggers don't have a hope anymore.