It's the second Sunday of December and time to trim the Christmas Tree.
But before I settle down for some steamed eggnog and an evening of holiday memories, I'll quickly type out a Sunday missive for you.
Did you get a change to see yesterday's post about the West Van home that was originally listed for $4.2 million, was assessed at $3.4 million and just sold for $2.5 million - 27% below assessed value ($912,000 below) and $400,000 less than what the seller paid for the property in 2009?
Keep that in mind as you check out this treatise from real estate agent Mike Stewart, posted in the Vancouver Observer on Friday:
Vancouver real estate market crash? Not so much...Don't be too hard on Mike, he's actually bang on with that assessment.
by Mike Stewart Posted: Dec 6th, 2012
For quite some time, many in the media have been predicting doom and gloom for Vancouver’s real estate market. The predictions are for a flood of new listings and falling demand; the reality, though, is it’s just not that bad.
The November 2012 REBGV statistics confirm that supply is contracting and Sellers are actually pulling out of the market, as illustrated by the large drop in the amount of properties listed for sale across the region.
A common assumption among more alarmist and less informed commentators is that recent softness in the Vancouver market is the beginning of a huge drop in prices. They contend that deeply indebted sellers will be forced to sell and buyers will not be able to buy. Many predict or allude to Canada experiencing a housing crash, not unlike what happened in the United States.
Thankfully the data is proving these theories wrong. Sellers in Vancouver are sitting on a significant amount of equity (value in the home after subtracting the mortgage balance). Many property owners who have been trying to sell have decided to take their properties off the market to wait for better market conditions. They are doing this because they can. This suggests we are not seeing panic in our current market.
Unemployment remains relatively low in Vancouver, interest rates are at all time lows, mortgages are easy to get, and the economy in BC is performing quite well.
This all means that buyers can and are able to buy property. Many are waiting to buy, but Vancouver is not in a situation where buyers cannot buy.
What all this means for buyers and sellers is that the Vancouver real estate market is softening gradually. Buyers are able to negotiate a far better deal than they could have 6-18 months ago. Sellers are able to get their property sold, though it may take longer and they may have to concede a bit more in negotiations than in previous markets.
Sorry doom and gloomers, the market is just not crashing.
Mike Stewart is a Vancouver realtor
The market is softening gradually.
This time last year pundits were adamant that the market 'might' go down 5% - 10% at best.
Now listings with asking prices below assessed value are commonplace. In Richmond real estate agents tell us you must 10% - 15% below assessed value if you even want to have people look at your house. Many Richmond single family houses are selling 25% below assessed value.
Listings 30% below assessed value are popping up. Sales 30% below assessed value are not surprising anymore.
When all is said and done, people will look back and say that those lucky enough to have gotten out now (at 30% below assessed value); they were getting out just as the market was 'softening'.
Stewart is right, the market is not crashing.
The real crash is yet to pick up steam.
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Mike Stewart has a typical myopic view that only looks at current data but he can't (or won't) extrapolate that data and the underlying trend out to the future. He also conveniently ignores the surrounding circumstances that brought us to where we are today.
ReplyDelete"He also conveniently ignores the surrounding circumstances that brought us to where we are today."
DeleteThis is the biggest issue I take with such predictions. Yes, things could plateau or softly slide. But the probability of a much larger correction based on how vastly skewed the markets are from fundamentals is much higher.
Real estate agents can only extrapolate when the trend is upward, then trees grow to the sky. It's only when there is a downward trend do they start believing in reversion.
ReplyDeleteSome realtors predict that the market is great, yet at the same time have their house on the market. They are now selling their homes that they have owned for 10-20 years. Why now?
ReplyDeleteUmmm...somebody might want to let "Einstein" Stewart know that listings normally get pulled-off the market as Christmas approaches. (This accounts for a whopping 2 open houses in the entire city of Richmond this weekend).
ReplyDeleteThat's why it's always good to compare against the same month a year earlier (...a better "apples to apples" comparison). In that regard, November 2012's inventory is extremely high.
So much for that argument!
I'm not seeing 30% drops in condo prices in the westside. Are they happening as a general rule? I hate looking at the most godawful unit in the most forsaken fugly building, seeing it 30 points below assessment and saying the way this unit goes, so goes the rest of the market. (I'm talking West side townhouse/duplex/condo... ain't seeing it).
ReplyDeleteNot yet. And the longer it takes the longer the usual SNAFU rescue could take place in Vancouver--by renewing the investor VISA, by finding property-loving Martians who want to call YVR home. By whatever else could come down the pike in the future.
Call me a pessimist but Mark isn't that far off market reality for today, as your article points out. And if our market goes the way of Seattle, San Francisco where buyers have pulled almost everything worth buying off the market and banks aren't forced to sell because they've got their pockets stuffed with bailout money, then I will be gravely disappointed and Mark will be LHFAO! Again!
What is the status of the Immigrant Investor Program right now? Is it slated to come back before 2013?
ReplyDeleteFrom what I read on their website, that program is still "suspended until further notice" but there are still investor immigrants being processed, just no new applications being accepted.
DeleteWe're on track for -6% to -4% YOY by the late winter. I don't think that's a "crash" either, but then again I can look also outside the window and see for myself it's not raining when I choose what to wear outside.
ReplyDelete